Caesars Buys William Hill

Caesars Entertainment submitted a bid of $3.7 billion for William Hill, which was accepted by its board even though analysts considered it undervalued. Caesars already owns a 20 percent stake in William Hill US, which has the exclusive right to offer sports betting at all Caesars properties.

Caesars Entertainment has bought William Hill for $3.7 billion, a deal approved by the board of directors.

The deal gives Caesars the remaining 80 percent of the U.S. joint venture it doesn’t already own through a deal struck by Eldorado Resorts before it bought Caesars. The deal allowed William Hill to run the sports books at Eldorado, and now was extended to the 50 properties under the Caesars brand.

Caesars indicated that it would likely sell the non-U.S. operations of William Hill, including the bookmakers in the UK, which have experienced a huge slump since the government lowered the betting stakes there. As a result, William Hill has closed almost 700 shops across Britain

The company turned its attention to the U.S. and has been successful in expanding its bookmaking operations in many states. The company operates retail sportsbooks in Nevada, Michigan, New Jersey, Indiana, West Virginia, Illinois, Colorado, and Iowa, and online in Iowa. It is also a licensed sports betting provider in numerous casinos in Mississippi and New Mexico and serves as the exclusive risk manager for the Delaware and Rhode Island sports lotteries.

“The opportunity to combine our land based-casinos, sports betting and online gaming in the U.S. is a truly exciting prospect,” Caesars CEO Tom Reeg said in a statement. “William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast-growing U.S. sports betting and online market.”

William Hill Chairman Roger Devlin said the deal was a positive for the company and a “fair and reasonable” offer.

“The William Hill board believes this is the best option for William Hill at an attractive price for shareholders,” he said in a statement. “It recognizes the significant progress the William Hill Group has made over the last 18 months, as well as the risk and significant investment required to maximize the U.S. opportunity given intense competition in the U.S. and the potential for regulatory disruption in the U.K. and Europe.”

Former Caesars Owner Apollo Global Management also planned to submit a bid, but balked after Caesars said it might cancel the deal for William Hill to operate its sports books should Apollo prevail.

Most likely is the sale of the European assets. 888 Holdings said it would bid on that business, and Betfred founder Fred Done said he would be a player as well. Both the retail and online businesses would be available, but it’s unclear if a separate sale would be pursued. Truist analysts said the UK assets could be worth as much as $4 billion. A report last week that Done is considering topping the Caesars bid for the entire company. He is currently the second-largest shareholder in William Hill. At least 75 percent of the shareholders must approve any deal.

Most analysts believe the Caesars offer significantly undervalues the company but that the sports book deal prevented any other significant offers.

“William Hill is worth significantly more than the 272 pence Caesars bid,” Jefferies analyst James Wheatcroft said in a research note. “But with the recently revealed poison pill structure of the JV and now a WMH board recommendation, Caesars Entertainment is well-placed to realize the full upside.”

Greg Johnson, an analyst at Shore Capital, told the Financial Times that Caesars had “effectively snookered” rival bidders by threatening to pull out of its joint venture with William Hill in the U.S.

Paul Leyland, an analyst at Regulus Partners, said it was difficult to value the company given the wide range of valuations for a U.S. sports betting industry. Leyland called a $35 billion valuation “hopeful at best,” and said it’s risky “buying an operationally suboptimal business to deliver on a strategic vision that is still nascent.”