888 Holdings has affirmed its interest in keeping William Hill’s 1,400 stores, as its chief executive said it had rebuffed approaches to sell them.
The comments came on Thursday (September 9) after the Gibraltar-based online gambling company said it had agreed to pay £2.2bn for the non-US operations of the British bookmaker from owner Caesars Entertainment.
“We did see interest in the retail from the outside, but we feel that the retail is an integral part of the William Hill asset,” CEO Itai Pazner told journalists in a conference call.
Betfred and Boyle Sports have been named as potential buyers for the William Hill shops, as 888, founded by Israeli technology entrepreneurs, is currently entirely digital.
But William Hill had already cut its retail empire from 2,300 shops to about 1,400 after stakes on fixed-odds betting terminals were slashed and COVID-19 hammered high-street foot traffic, and the stores remain profitable, 888 said.
The retail cash flow will help it expand in the US, executives said.
Cost cutting will not be a focus of the deal, Pazner said, and 888 views the deal as more of a merger than an acquisition.
The £2.2bn purchase price is more than 888’s current market capitalization of £1.5bn. The company said it has obtained £2.1bn in financing and it will raise a further £500m in a share sale at some point.
888 said it made the deal to boost its growing sports-betting operations and add expanding regulated markets.
In an analyst presentation, 888 claimed that the William Hill acquisition would have boosted its UK online market share to 14 percent by June this year if it owned the company then, from 9.3 percent in April 2020.
The deal could be a “win-win” for both Caesars and 888, said Regulus Partners.
The deal gives 888 scale to help it better compete worldwide, strengthens its sports-betting systems, and puts it in third place in UK online market share, ahead of bet365 and behind only Flutter Entertainment and Entain, the group said.
The risk for 888 is that the combined company will get 70 percent of revenue from the UK, which is facing a potentially stricter regulatory regime in an upcoming legislative review, Regulus said.
About 40 percent of that UK revenue is expected to come from retail, where it is unknown how strong post-COVID recovery will be, the group said.
But Caesars got a “highly attractive headline price”, Regulus said.
Of the £2.2bn sale price, the company should net £835m, or $1.2bn after debt repayment, Caesars said.
After the sale, Caesars will have paid a net sum of less than $1bn for William Hill, said Chad Beynon of Macquarie Research.
But the price 888 paid looks steep based on William Hill’s valuation when it was purchased, according to the Financial Times’ Lex columnists.
William Hill has since improved its apps, boosting its UK market share and “as a trade buyer, 888 should have a deeper understanding of the business than financial bidders”, Lex wrote.
888 shares dropped 3.3 percent on Thursday to 389 pence per share, but that decline reflects the loss of 888’s status as a potential acquisition target, plus its plans to sell more shares, the columnists said.
888 has applied for a licence in Germany, where it expects to be the fifth-largest online gambling operator with about a 3 to 5 percent market share, Pazner said.
But it has not yet applied for a licence in the Netherlands, although it expects to apply in the second round of applications, he said.