William Hill merger plan hits serious hurdle
Bookmaker’s largest investor opposes £4.6bn tie-up with Canada’s Amaya
William Hill’s largest shareholder has come out against the bookmaker’s attempt to merge with Canada’s Amaya in a potentially grievous blow to the proposed £4.6bn deal.
Britain’s largest retail bookmaker by number of shops has been in negotiations with Amaya, which runs Pokerstars, the world’s largest online poker business, over a tie-up that would create an “international leader across online sports betting, poker and casino games”.
In a serious setback to the talks, Parvus Asset Management, which owns 14.3 per cent of William Hill, criticised the move, saying the combination had “limited strategic logic and would destroy shareholder value”.
The hedge fund said William Hill should instead consider putting itself up for sale.
In a letter to the bookmaker’s board on Thursday, Mads Eg Gensmann and Edoardo Mercadante, Parvus co-founders, said: “We strongly encourage that the board and management stops wasting valuable time and shareholder resources pursuing this value-destroying deal.
“Instead, the board and management must focus on maximising value for William Hill owners, rather than Amaya shareholders, by considering all alternative options available, including a sale of William Hill.”
William Hill and Amaya have both been seeking a transformational deal in response to a rapidly consolidating sector. Rivals Betfair and Paddy Power joined forces in March, Ladbrokes and Gala Coral are in the final stages of finalising their merger. GVC Holdings, owner of Sportingbet, bought Bwin last year after outbidding 888 Holdings.
The two gambling companies argue that there is “sound industrial logic” behind their mooted combination. William Hill is being squeezed by competition from online competitors and new taxes. Amaya has struggled to expand its sports betting arm and thereby diversify the company.
The merged company could provide an opportunity to cross-sell to customers with William Hill, for example, gaining access to Amaya’s 100m online poker customers.
But Mr Eg Gensmann and Mr Mercadante dismissed poker as a “mature, if not structurally declining, revenue stream” attractive only to skilled players, “making it inherently difficult to sell them other online gambling products where the house ultimately wins”.
In August, William Hill rebuffed a £3bn takeover bid from a consortium of Rank Group and 888 Holdings, which the board claimed was a deal based on on “risk, debt and hope”.
The Parvus co-founders said the proposed reverse takeover of Amaya had similar flaws. They suggested the transaction was similarly risky, given it was a “complex, cross-border” deal just as Canadian group faced a potential $870m fine following a ruling last year by a court in Kentucky.
They added that William Hill, led by Gareth Davis, chairman, and Philip Bowcock, interim chief executive, were prepared to sell its shares in the deal at 300p, despite the board arguing that the Rank-888 offer of 394p a share had substantially undervalued the UK bookmaker.
Finally, Mr Eg Gensmann and Mr Mercadante argue that the Amaya deal would increase net debt by £2.8bn, after previously dismissing the Rank-888 deal for increasing leverage by about £2.2bn.
In response to the letter, William Hill said: “Given the strategic fit, diversification and potential synergies we have a responsibility to all our shareholders to fully assess this. However, it is premature for us to draw conclusions whilst this work is ongoing.
“The board would not come forward with a transaction unless it was satisfied that it was in the interests of all shareholders.”
Amaya did not respond to requests for comment.