M&A

WH shareholders to vote on Caesars acquisition on 17 November

5 minutes read
William Hill shareholders will vote on Caesars Entertainment’s proposed £2.7bn (€2.97bn/$3.51bn) acquisition of the business on 17 November, ahead of a court hearing on the deal two days later.

The acquisition, which is to be completed through a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act, will see Caesars UK Bidco subsidiary acquire the business. 

Under that section of the Companies Act, it would require at least 75% of shareholders to vote in favour of the transaction for it to go ahead. 

In a letter to shareholders, William Hill chair Roger Devlin looked to talk up the benefits of the deal. He pointed out that Caesars’ 272 pence per share bid represents a 57.6% premium on the operator’s closing share price of 172.55 pence on 1 September, the last business day before the offer was made. 

In addition, this represents a 80.7% premium on the volume-weighted average closing price of 150.54 pence per share for the three months to 24 September, the last day before the offer period began. 

Devlin said the bid reflected both the “significant progress” the business had made over the past 18 months, as well as the risks and significant investments required to maximise opportunities in the US. 

In terms of strategic progress, Devlin said William Hill’s leadership had improved the quality of its products and enhanced customer experience, while taking decisive action to reshape its retail business in the face of structural regulatory headwinds.

The novel coronavirus (Covid-19) shut-down had also permitted the operator to further develop its product and experience, while its £224m share placement strengthened the operator’s balance sheet, Devlin wrote. 

In the US, it had also rolled out a mobile offering, and extended its customer reach through partnerships with CBS Sports and ESPN

In considering the offer, Devin explained that the board had considered a number of factors affecting the opportunities and risks ahead for the operator. He pointed out that while the Caesars joint venture had helped the operator establish a leading position across the states, the structure of the deal would have to change, allowing for greater integration of each partners’ assets, to drive further growth.

Furthermore, there was significant potential for regulatory disruption in Great Britain and Europe, while Covid-19 could cause a long-term hit for sports schedules, retail operations and consumer confidence. 

In deciding to recommend the deal, Devlin explained that the board had taken into account the interests of all stakeholders. He highlighted the “high value” Caesars placed on William Hill employees, and said that it would allow the operator to implement employee retention arrangements to ensure key staff were kept on and treated fairly. This includes a £2.1m retention package for chief executive Ulrik Bengtsson and finance chief Matt Ashley.

Furthermore, he noted, Caesars had committed to maintaining compensation, benefits and redundancy agreements applicable to the operator’s staff until 31 December 2022.

Once the planned divestment of the William Hill International business was completed, it would look to make the acquirer do the same. This potential acquirer would also be expected to have “aligned objectives and approaches” for the international business, and committed to achieving its current longer-term strategy. 

All other office locations would be maintained following completion of the deal, and the operator’s headquarters would be retained until the international divestment is finalised. 

As well as protecting a number of existing assets, the acquisition would also allow for significant development and expansion of the US business, Devlin continued. Not only would it be able to offer a more unified customer experience by consolidating apps and wallets, but this would be underpinned by William Hill’s Liberty Technology platform. 

It would also be able to leverage Caesars’ partnerships with sports teams, leagues and events – including its exclusive partnership with the National Football League (NFL). 

Caesars also aims to pursue a “more integrated arrangement” with a media business, something that the William Hill deal would facilitate, and the operator would also gain full access to the 60m-strong Caesars Rewards loyalty database. 

This, it believes, could ultimately generate online betting and gaming revenue of between $600m and $700m in its 2021 fiscal year. 

The William Hill directors consider that the terms of the acquisition are in the best interests of William Hill shareholders as a whole,” Devlin wrote in conclusion. 

He pointed out that the board, which holds 2.1m shares in the business, or 0.2% of its issued share capital, had already committed to backing the bid. 

In related news, Apollo Global Management, the private equity giant that made a rival proposal to acquire William Hill, has been given a deadline of 12 November to make a firm offer for the business, or withdraw from the process.

While Apollo put forward a proposal before Caesars, it is yet to follow up with a concrete offer. However should this be accepted, William Hill would lose US market access, with Caesars saying in its bid that it would cancel its joint venture with the operator if Apollo’s bid was selected.

Shares in William Hill plc were trading down 0.54% at 277.50 per share in London this morning (26 October), while shares in Caesars closed up 1.03% at $54.69 per share on Friday (23 October).

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