William Hill Upholds Resistance to Offer for U.K. Bookmaker

  • Board continues to see no merit in holding talks: chairman
  • 888, Rank see more than 100 million pounds of cost savings

U.K. bookmaker William Hill Plc maintained its resistance to a 3.2 billion-pound ($4.2 billion) offer from 888 Holdings Plc and Rank Group Plc after the suitors presented a case for their rejected bid that includes at least 100 million pounds of annual cost savings.

William Hill’s board continues to see no merit in holding discussions with its smaller gaming rivals, Chairman Gareth Davis said in a statement Thursday. The bookmaker has said it is substantially undervalued by the bid.

The suitors have until Aug. 21 to make a formal offer for William Hill, which has also cited the risk presented by a potential 2.2 billion pounds of additional debt as a reason for rejecting the “highly complicated” bid. Most analysts say they will have to pay more than their initial bid of 364 pence a share in cash and stock. The potential takeover would mark a step up in betting-industry deals that have included the pending merger of competitors Ladbrokes and Coral, and the combination of Paddy Power and Betfair.

Rank and 888 said the combined group would be Britain’s largest gaming company across all platforms, including William Hill betting shops, Mecca and Grosvenor bingo halls and online wagering sites. The company would likely be a constituent of the U.K.’s FTSE 100 Index, they said.

Shareholder Support

The proposed combination of the three companies would provide opportunities to boost revenue through cross-selling of products and moving more customers online, the bidders said. The enlarged group would be run by Rank Chief Executive Officer Henry Birch, a former head of William Hill’s online business.

“888 and Rank believe the proposal represents a compelling value-creation opportunity for William Hill,” said the suitors, who are being advised by Morgan Stanley.

The takeover proposal is backed by both the main shareholders of 888 and Rank, the companies said. Malaysia’s Hong Leong Co. owns 56.1 percent of Rank, while Israel’s Shaked and Ben-Yitzhak families hold 50.7 percent of 888.

The bidders sought to downplay concern over the highly leveraged nature of the takeover, saying that they expect to reach a net debt-to-Ebitda ratio of 2.5 to 3 times in 2018 after a “rapid” reduction of borrowings.

The bidders are likely to have to raise their offer to “well over” 400 pence a share, said Simon French, an analyst at Cenkos Securities. The cash component would need to be increased by at least 40 pence a share to be considered, he said. The proposal from 888 and Rank comprises 199 pence a share in cash and 0.725 shares in the bidding company.