William Hill Spurns 888 Holdings / Rank Group Buyout Offer

The board of directors for William Hill Plc has confirmed that it has “unanimously rejected” a proposal to buy the company in a joint offer received from 888 Holdings Plc and Rank Group Plc.  William Hill, the world’s largest bookmaker, suddenly found itself the target of corporate aggression after its recent quarterly business report, which reflected a severe downturn in revenue and profit — particularly in the online sector — and which resulted in the immediate ouster late last month of CEO James Henderson.

William Hill execs had already signaled their probable intent to turn down any offer for the company, making the issuance of a brief bulletin by the company yesterday something of a formality.  In turning down the joint 888 Holdings / Rank Group offer, which carried a market value of approximately £3.6 billion (US $4.7 billion), in part because it believes the offer is “highly opportunistic” … as if that phrase wouldn’t describe virtually all corporate takeover attempts.  William Hill’s board also dissed the offer as representing “only 11 percent” over the company’s current share price.

Hill’s press centre issued the following bullet-point statement in its dismissal of the bid:

Aug 9 William Hill Plc :

* Statement regarding 888 Holdings and Rank Group

* Confirms that it has received an unsolicited non-binding highly conditional proposal from 888 Holdings Plc and Rank Group Plc regarding a potential combination of three companies

* Board of William Hill has unanimously rejected proposal as it substantially undervalues William Hill

* Board of William Hill does not believe that a combination of William Hill with 888 and Rank will enhance William Hill’s strategic positioning or deliver superior value for shareholders

* Proposal comprises 199 pence in cash and 0.725 BidCo 1 shares per William Hill share, and would result in William Hill shareholders owning 44.6 pct of combined group

* Proposal represents an estimated value of 364 pence per William Hill share based on closing price of 888 and Rank on Aug. 5 2016 with 45 pct of proposed consideration in form of BidCo shares

* Proposal represents premium of only 11 pct to William Hill share price of 327 pence on Aug. 8 2016

* Board of William Hill has also taken into consideration substantial risk for William Hill shareholders presented by proposal

* Proposal involves a highly complicated three-way combination at a low premium with BidCo assuming approximately 2.2 bln stg of leverage in order to fund cash element of consideration and refinance existing debt within three companies

* Chairman of William Hill, said: “this conditional proposal substantially undervalues William Hill”

* “It is a very complex three-way combination at a low premium involving substantial risk for William Hill shareholders: execution risk, integration risk and risks of materially increased leverage” – Chairman

* There can be no certainty that a transaction will be forthcoming or as to its terms

* Proposal represents a premium of only 16 pct to William Hill share price of 314 pence on July 22 2016

* William Hill shareholders are strongly advised to take no action.

William Hill’s share price dropped by a couple of percentage points on the news.  Despite the weak numbers posted last month, the company did announce a recent half-year profit increase, bolstered by Euro 2016 and Premier League results.  The company has also attempted its own smaller acquisition moves, perhaps in part to make things a bit messier should any hostile-takeover attempt continue: William Hill recently announced its pickup of Grand Parade, a betting and gaming digital solutions company, in a £13.5 million deal.

While suitors 888 and Rank offered only short statements of acknowledgment about their denied joint bid, some sharp words emerged.  Eyal Shaked, the son of 888 co-founder Avi Shaked, Tweeted the following after news broke about the declined offer: “Pure ego made #WilliamHill reject #Rank and #888 £3.16bn bid and that will be their downfall.”

888 and William Hill are likely to continue eyeing each other warily.  A year ago, it was William Hill that tried to scoop up 888 Holdings and that company’s online-focused business in another tabled offer that ended up going nowhere.  Whether William Hill can succeed in its stated objectives of strengthening its online presence will likely determine whether or not this corporate dance resumes in the months ahead.