Caesars Secures $2.03 Billion from Deutsche Bank, JPMorgan for William Hill Deal

Posted on: October 13, 2020, 08:26h. 

Last updated on: October 13, 2020, 09:29h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Caesars Entertainment (NASDAQ:CZR) has procured $2.03 billion in bridge financing from a pair of lenders, allowing the gaming giant to forge ahead with plans to acquire British bookmaker William Hill (OTC:WIMHY) for $3.69 billion.

Caesars William Hill
Caesars gets $2.03 billion in financing from two lenders to acquire William Hill. (Image: Reuters)

Deutsche Bank and JPMorgan are providing a 540-day asset sale bridge facility and a 60-day cash confirmation bridge plan. Bridge loans are usually short-term in nature, typically running in terms of just a few weeks up to three years. While the time frames on this type of financing are shorter compared to other lending avenues, bridges carry elevated interest rates because the loans are considered higher risk by creditors.

The facilities may be used to finance or refinance the acquisition, refinance the debts of William Hill and its subsidiaries, pay transaction fees and expenses, and for working capital and general corporate purposes, among other things,” according to Seeking Alpha.

Last month, reports surfaced that Caesars was mulling a move on the sportsbook operator, with confirmation of the target accepting a $3.69 billion cash offer arriving on Sept. 30.

Other Sources of Cash

The aforementioned financing from Deutsche Bank and JPMorgan doesn’t cover Caesars’ entire tab for acquiring William Hill.

However, the Harrah’s operator already pulled other levers. On Sept. 28, the company said it’s selling 30 million shares of equity to raise capital. This figure could increase to 34.50 million if underwriters exercise a 30-day option to buy another 4.50 million shares. Deutsche Bank and JPMorgan acted as joint lead book-running managers for that offering.

“The company expects to use the net proceeds from the offering for general corporate purposes, including, potentially, the previously announced possible cash offer for the entire issued and to be issued share capital of William Hill,” said Caesars.

Following Caesars’ revealing its offer for the UK-based company, some investors said it was inadequate. They noted it was $100 million less than what the casino operator offered up last year. That stoked speculation rival bids for William Hill could emerge, but that’s yet to happen.

Potential for Rapid Repayment

Caesars’ goal in acquiring William Hill is clear. Combine a dominant land-based casino business with the largest domestic sportsbook operator. This would leverage well-known branding and enviable market share into a force in the fast-growing online casinos and sports wagering industries.

On that note, Caesars is essentially acquiring William Hill for the target’s US business and is widely expected to quickly jettison the bookmaker’s European operations after the deal closes in the first half of 2021.

Market observers estimate William Hill’s European business is worth a minimum of $2 billion. Ad the more valuable side of the enterprise, there are plenty of interested buyers.

If the Flamingo operator can fetch $2 billion or more for William Hill’s Europe unit, it could rapidly repay the bridge loans from Deutsche Bank and JPMorgan.