Caesars, William Hill Acknowledge Takeover Discussions Valuing Bookmaker Near $3.7 Billion

Posted on: September 28, 2020, 12:34h. 

Last updated on: September 28, 2020, 09:31h.

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

Caesars Entertainment (NASDAQ:CZR) and William Hill (OTC:WIMHY) are reportedly confirming advanced negotiations regarding a takeover of the British sportsbook operator, valuing the company at $3.69 billion.

William Hill Caesars
Talks between Caesars and William Hill are heating up with a $3.7 billion offer on the table, according to reports. (Image: Bloomberg)

The Caesars Palace operator is reportedly making a cash offer of 272 pence a share for the operator of its sportsbooks, valuing William Hill at 2.9 billion British pounds, or a 25 percent premium to where its London-listed shares closed last Friday. The news was originally reported by Bloomberg late Sunday evening.

Based on USD/GBP exchange rates at this writing, that works out to the aforementioned $3.69 billion figure.

Reportedly, William Hill’s board of directors told Caesars the offer “is at a price level that they would be minded to recommend” the deal to shareholders.

On volume that was more than five times the daily average, William Hill’s US-listed equity surged 42.39% last Friday when the company confirmed it was weighing takeover proposals from Apollo Global Management (NYSE:APO) and Caesars. At that time, details were sparse except for the sportsbook operator saying it gave its two suitors a deadline of Oct. 23 to make offers or walk away.

CeDealmaking Continues

Caesars is barely more than two months removed from finalizing the $17.3 billion takeover that created the largest domestic gaming company by the number of properties. It’s already back at the consolidation table, looking to capitalize on the online casinos and sports betting booms in the US.

The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect,” said Caesars CEO Tom Reeg, according to UK media outlets.

Reeg led Eldorado Resorts, the company that acquired Caesars and that is itself the product of multiple acquisitions. That management team now runs “new Caesars,” and with their reputation for successful consolidation, analysts speculated it was probably just a matter of time before another purchase was made. But two months may catch some in the investment community by surprise.

However, the short time line between deals speaks to a US iGaming and sports betting opportunity set some on Wall Street calling it potentially “transformational” for Caesars. Reeg recently said Caesars’ internet casinos and sports betting business could generate $600 million to $700 million in revenue next year. The UK-based company has the third-largest share of the US online sports wagering market.

It’s not immediately clear if Apollo plans to top Caesars’ offer for William Hill. Should the Harrah’s operator emerge victorious for the sportsbook firm, investors would likely be pleased the buyer isn’t using equity to finance the deal. But they may be concerned about the cash outlay, because the casino giant had $14.7 billion in debt and $1.7 billion in cash as of June 30.

Will Previous Ideas Come to Fruition?

In recent weeks, prior to the emergence of Apollo as a suitor for William, analysts discussed the idea of Caesars and the bookmaker combining the former’s iGaming and sports wagering units with the latter’s US operations and spinning off 20 percent of that enterprise to investors.

Consensus wisdom in the analyst community is that Caesars doesn’t want William Hill’s European operations, whereas Apollo is more attracted to that part of the bookmaker’s business.

“William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast-growing US sports betting and online market,” said Reeg.

Should Caesars win the tussle for William Hill, it would conclude a lengthy history of speculation tied to the two companies. Last year, prior to Eldorado’s offer, Caesars and William Hill held merger talks.