Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

Who would dare wager on William Hill doing a deal?

The U.K. betting group was robust in its rejection of a three-way tie up with rivals Rank and 888 back in August. Now it has revealed friendly merger talks with PokerStars owner Amaya. Investors aren't betting on this being a winner either.

William Hill and Amaya of Canada say they're planning a nil-premium merger-of-equals. The combined company would be worth $5.5 billion. Based on Friday's closing prices, William Hill shareholders would own 58 percent of the enlarged company.

Deal Odds
WIlliam Hill shares have slipped slightly since the bookmaker spurned an approach from Rank and 888
Source: Bloomberg

For Amaya, a deal would mark a fresh start. David Baazov resigned as CEO earlier this year after the stock market regulator accused him of market manipulation, allegations he said were false and that he would vigorously contest.

Amaya's Fortunes
The shares haven't recovered since the company cut its earnings forecasts in November 2015
Source: Bloomberg

A transaction would see Amaya's Canadian listing disappear and its governance revamped. William Hill would retain its chairman and probably appoint Baazov's successor Rafi Ashkenazi as CEO. That solves a problem for William Hill -- it doesn't have a permanent CEO right now.

Strategically, a deal would accelerate William Hill's journey away from the U.K. and physical betting shops. About 60 percent of the combined company's business would be on online and 40 percent outside Britain.

Financially, it is reasonable to assume the union could achieve the same 100 million pounds ($124 million) of annual cost savings that the aborted deal with 888 and Rank had promised. That could be worth an estimated $900 million of market capitalization. William Hill's share would be worth $536 million, or about 50 pence per share. Yet the stock rose only 5.4 pence to 300 pence on Monday.

So it's easy to see what's in this for William Hill shareholders. They would get a big slice of value creation, and despite being the larger partner, pay no premium. Amaya reinvents itself and gets some synergy benefit too.

Why the cold reaction? It may be because the combined company's net debt would be more than 3.4 times Ebitda at the end of 2016, based on forecasts compiled by Bloomberg. It would want to pay that down pretty quickly. William Hill snubbed 888 and Rank in part because the deal would have boosted its debt load.

There are too many other uncertainties surrounding Amaya. Berenberg analysts point out the company is embroiled in litigation in Kentucky over losses racked up by poker players.

Meanwhile, in this consolidating industry, the nil-premium structure makes these talks easy to disrupt on either side. It would be wise to hedge your bets on whether this deal will come off.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Chris Hughes in London at

To contact the editor responsible for this story:
Edward Evans at