William Hill Shares Gain as Profit Boost Softens Bid BlowBy
Shares leap as much as 6.4% even after 888, Rank abandon plan
Stock price remains below value of withdrawn proposal
William Hill Plc shares rose in London after the U.K. bookmaker softened the blow of an abandoned takeover by saying full-year profit will be at the top end of its target range.
The company has made a “good start” to the second half, it said after markets closed Thursday. Earlier, 888 Holdings Plc and Rank Group Plc gave up on a proposal to combine with William Hill after their increased 3.1 billion-pound ($4 billion) bid was rejected.
William Hill shares rose as much as 6.4 percent to 322.6 pence, boosting the bookmaker’s market value to about 2.8 billion pounds. The stock remains below the value of the abandoned bid, which Rank and 888 said was worth 394 pence a share. 888 rose 5.6 percent to 216.50 pence.
The failure of the bid leaves William Hill to seek a turnaround in a rapidly consolidating market where competition has never been greater. The company needs to find a new chief executive after James Henderson was ousted a month ago. Among its biggest challenges will be to revive a struggling online business, one of the main reasons that the bookmaker cut profit guidance in March.
The company anticipates that operating profit for the year will be closer to 280 million pounds than 260 million pounds, it said Thursday. The increased guidance reflects better-than-expected returns from the Euro 2016 soccer tournament, and stronger revenue growth from the gaming machines inside its betting offices.
Rank and 888 said they withdrew their proposal for a cash-and-share takeover after failing to “meaningfully engage” with the board of William Hill. Under U.K. rules, they can’t make a hostile bid for at least six months unless someone else does.
“The consortium was stymied by not being able to increase their cash offer without further increasing the leverage on the combined entity,” Simon French, an analyst at Cenkos Securities, said in a note. “The alternative was to increase the paper component of the offer, but this would further dilute the respective major shareholders, also an unacceptable outcome.”
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.
A deal would have spurred a round of betting-industry consolidation that has included the combination of competitors Ladbrokes and Gala Coral, as well as Paddy Power and Betfair. About $16 billion has been splurged on betting-company takeovers in the past two years, according to Bloomberg data, more than in the previous three years combined.
“The gaming industry is demonstrating through a whole series of M&A transactions that smashing these businesses together can create major synergy benefits and generate value for shareholders,” Jason Holden, an analyst at Liberum Capital, said in a note.
Rank and 888 had forecast annual cost savings of at least 100 million pounds from a merger with William Hill.
Analysts at Berenberg said it was unlikely that other suitors would emerge for William Hill. The company is too big for other U.K. betting operators to absorb easily, they said, and unattractive to private equity because it would offer insufficient returns.