Caesars Entertainment, the company behind the Caesars Palace hotel on the Las Vegas Strip, is in competition with Apollo Global Management to buy British bookmaker William Hill.
The two groups have contacted betting company FTSE 250 with buyout proposals since late August, Hill said on Friday, adding that there was no certainty an offer would be made.
The UK gambling company has increased its presence in the growing US sports betting market. It is already 20% owned by US casino operator El Dorado, which completed a $ 17.3 billion takeover of Caesars in July.
The deal with El Dorado gives William Hill access to the sports betting offering at all of the US group’s casinos in the 18 states where it has been legalized since a federal ban was lifted in 2018.
William Hill shares were trading at around 172p before the Apollo Approach, well below the current price of 286p, and were valued at just 128p in a £ 223million capital raise in June. That leaves the possibility that any offer will be based on a valuation lower than the current share price, two people briefed on the matter said.
The reversal of US sports betting policy has caused a stampede of European gaming companies into the United States, facing increasingly stringent regulation in their home markets.
Greg Johnson, analyst at Shore Capital, estimated that the US market could be worth $ 20 billion annually and said that if William Hill pursues an “all-in” deal with Caesars, his market share “could possibly be worth around 8 billion dollars. – potentially 300 pence per William Hill share ”.
Despite having a presence in the United States through its Nevada business since 2012, William Hill’s share price has lagged behind its competitors due to its exposure to the increasingly regulated UK market.
William Hill was established by its eponymous founder as a mail and telephone betting service in 1934. It was one of the first companies to open betting shops in the UK when it became legal to do so. in 1961 and at its peak in the 1970s, it had more. more than 14,000 sites.
As UK rivals Flutter and GVC have grown through multiple deals in recent years, William Hill has struggled to find a suitor after a joint takeover by Rank Group, owner of Mecca Bingo, and the games company. online 888 failed.
The company warned in March that the closure of its city center betting shops and lack of sporting venues due to the pandemic would result in annual revenues of up to £ 110million. However, last month William Hill reported a ‘robust recovery’ since sport resumed, allowing him to repay £ 24.5million in leave funds.
The growing popularity of online betting led the group to permanently close 119 stores.
Shares of William Hill, which fell early in the coronavirus crisis, surged on Friday, jumping around 33% to cross the 300p mark before falling to 286p. Bloomberg News first reported the discussions with Apollo.
Private equity firms, which have raised record-sized funds in recent years, have increasingly turned to UK listed companies since stock prices fell in March and April. They are particularly focused on UK companies valued between £ 1-5 billion, a senior banker said.
Apollo, the US private equity group, is also offering to buy UK supermarket chain Asda, in a deal that could be worth around £ 6.5 billion.
Apollo declined to comment on a potential offer for William Hill.
William Hill’s announcement will start the clock for the bid process under UK takeover rules. Groups have until Oct. 23 to announce firm plans or leave, although extensions can be made.