Caesars in ‘advanced’ talks to buy William Hill for £2.9bn

William Hill is in “advanced discussions” with US casino operator Caesars Entertainment over a takeover that would value the UK bookmaker at £2.9bn.

A tie-up with William Hill would give Caesars greater access to lucrative sports betting, which the British bookmaker already offers in the US, including in Caesar’s 54 casinos.

However, any deal would bring uncertainty for William Hill’s UK operation as Caesars said it would “seek suitable partners or owners” for the FTSE-listed group’s businesses outside the US.

William Hill on Friday revealed it had also received two approaches from the private equity firm Apollo Global Management.

Caesars revealed its powerful position in the negotiations as it warned that should William Hill accept an offer from Apollo, it would cut its venture with the UK bookmaker. That would leave William Hill to negotiate fresh deals for market access with other US operators.

Since the US federal court overturned a ruling that banned sports betting in 2018, US casino operators have increasingly looked to pursue tie-ups with European gambling companies, which have years of experience running sportsbooks — the US equivalent to betting shops.

Caesars’ joint venture with William Hill allows the British bookmaker first rights to offer sports betting in its casinos — including Caesar’s Palace in Las Vegas — in return for a 20 per cent stake in William Hill’s US arm.

The deal was originally struck between William Hill and El Dorado, which merged with Caesars following a $17.3bn takeover in July.

Caesars’ mooted offer of 272p per William Hill share is a premium of 81 per cent to William Hill’s average price in the three months to September 24. However, it was below the 312p closing price on Friday.

William Hill’s share price fell 12 per cent in morning London trading on Monday.

Greg Johnson, an analyst at Shore Capital, said that given the size of the opportunity in the US, Caesars’ offer was “far too low” and that the value for William Hill’s US assets alone could be closer to $4bn.

Mr Johnson estimates that the market for sports betting in the US could achieve $20bn or more in revenues within the next decade but said that given evidence of its popularity so far that could be “undercooking it”.

Caesars said it believed “the sports betting and online gaming sector represents one of the largest areas of growth in the US gaming industry, with some analysts recently estimating a potential total addressable market size ranging up to $30bn to $35bn”.

The combination of William Hill’s US assets with Caesars could generate between $600m and $700m in revenue by 2021, Caesars said.

William Hill has been a stalwart of the British high street since its eponymous founder opened its first betting shops in 1966. At its height, it owned 14,750 stores.

A recent crackdown on gambling across the UK and Europe, however, combined with a surge in popularity of online betting, exacerbated by the pandemic, has forced the company to shut more than 800 of its shops.

William Hills’ exposure to the UK, where it makes the majority of its revenues, has left its share price trailing larger rivals such as Flutter and GVC in recent years. It hit a low of 36p in March as sporting events were cancelled and lockdowns forced its betting shops to close.

However, the bookmaker has benefited from the popularity of online gambling during lockdowns and announced in August that it would pay back the £24.5m it had claimed in furlough funding from the UK government.

The Las Vegas-based casino company also announced on Monday that it would launch an equity raise, the proceeds of which it would use along with cash and $2bn in loans secured against William Hills’ non-US assets to fund the offer.