London: William Hill Plc rejected an increased £3.1 billion (Dh14.6 billion, $4 billion) offer from 888 Holdings Plc and Rank Group Plc, stepping up its resistance to a takeover of the U.K.’s biggest bookmaker as a deadline looms.
The two sides couldn’t even agree on the valuation of the suitors’ second bid, which would accelerate a round of betting-industry consolidation that has included the pending merger of competitors Ladbrokes and Coral, and the combination of Paddy Power and Betfair. William Hill said the new bid was worth 352 pence per share, while Rank and 888 gave a valuation of 398 pence.
The rejection ratchets up the stakes ahead of an August 21 deadline for the suitors to make a formal offer. William Hill shares fell further below the bid price as analysts remained sceptical that a deal will materialise. The bookmaker has cited both the price of the offer and the risk presented by a potential £2.2 billion of additional debt as reasons for rejecting the “highly complicated” bid.
“We continue to believe this deal is unlikely to happen,” analysts at Berenberg said in a note Monday. Rank and 888 probably won’t raise their terms again, while William Hill’s board is unlikely to shift its stance, they said.
William Hill shares fell 3 per cent to 323.6 pence at 10:12am in London, after declining as much as 3.3 per cent.
Valuation gap
William Hill said the new cash-and-stock proposal compares with a first bid of 339 pence. The valuation is based on share prices as of July 22, the last trading day before the takeover approach was announced, the company said Monday.
Rank and 888 said their latest bid valuation is based on Aug. 5 share prices and their calculation of their own merger. The suitors increased the stock element of their bid, while leaving the cash portion unchanged at 199 pence a share. William Hill shareholders would own 48.8 per cent of the combined company, compared with 44.6 per cent under the original terms.
William Hill said it’s now calculating the value by reference to the combined market capitalisation of the three companies on July 22. It had originally based its sums around the terms of a stock offer for Rank by 888 that would precede their proposed takeover of William Hill.
The suitors, who are being advised by Morgan Stanley, said their valuation of 394 pence doesn’t include potential cost savings of more than 100 million pounds a year. They estimate those to be worth an additional 52 pence a share.
Moves nothing
The new proposal “moves nothing forward,” William Hill Chairman Gareth Davis said in a statement. “I can’t engage in something based on risk, debt and hope.”
The bidders are likely to have to raise their offer to “well over” 400 pence a share, according to Simon French, an analyst at Cenkos Securities.
Citigroup and Barclays are advising William Hill.
Rank and 888 have 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.
Rank on Monday delayed the announcement of its financial results for the latest fiscal year by five days, until August 23, citing the William Hill bid.
