A few minutes before the end of trading on August 18, The Rank Group and 888 Holdings announced that they no longer intend to bid for sports betting operator William Hill.
Sunday, August 21, was the regulatory deadline for a bid to be made. Rank and 888 decided that the negative response they received from William Hill’s board made it better to “shut up” rather than “put up.”
The extended and detailed business case which the “Consortium” of 888 and Rank presented to counter objections failed to change the attitude of William Hill directors.
888 CEO is disappointed
888 CEO Itai Frieberger said:
“We are disappointed that the board of William Hill did not share our vision of the combined businesses. We believe that there was compelling industrial logic for the combination of these highly complementary businesses, which in our view would have brought scale, diversification, and strong revenue and cost synergies, from which all shareholders would have benefitted.”
The statement released by 888 said that the deal would have “created a transformational force in the global betting and gaming industry and the UK’s largest multi-channel gambling operator by revenue and profit.”
Under the UK’s takeover rules, 888 and Rank have reserved their right to make an offer if William Hill’s board changes its mind, or a third party makes an offer for the company.
William Hill plans to continue its current strategy
The board of directors of William Hill vehemently rejected the corporate logic of the deal in their initial response. In their statement acknowledging the withdrawal of the bid, they state that they will continue with their current business strategy.
Gareth Davis, chairman of William Hill, said:
“We note the Consortium’s confirmation that it no longer intends to make an offer for William Hill. We will continue to focus our efforts on our strategy to deliver value for shareholders. The team has a clear plan to grow by diversifying digitally and internationally and four priorities to get us there. We have had a good start to the second half of the year and the Board now expects operating profit1 for 2016 to be at the top end of the previously guided £260-280m range.”
The four main elements of the strategy are:
- Maintain the pace of online’s turnaround
- Deliver the technology roadmap
- Drive increased efficiencies across the group
- Refocus the international growth and expansion
The search for a new CEO is also high on the agenda.
Where will 888 find a partner now?
Even though the bid for William Hill involved a merger with Rank, that polygamous corporate marriage doesn’t appear likely to proceed without the third member.
Last year 888 failed in its bid for bwin.party, and now it has failed in another high profile bid. Both were driven by the need to find the corporate scale necessary in a highly taxed and regulated environment.
888’s fingers may have been burned by the failure of this bid, but its ambition to grow by acquisition is probably still strong.
It is difficult to see what takeover targets will simultaneously suit 888’s pocket and ambition.
Amaya remains a possibility, but 888 is looking to grow sideways beyond the poker vertical rather than concentrate its future growth prospects in a declining market.
As a private company, Bet365 is probably not for sale, at virtually any price. Founder and CEO Denise Coates looks to be having too much fun running the company for take any offer seriously.
Ladbrokes and Coral are moving forward with their deal, Paddy Power and Betfair have already merged.
Playtech is the only major UK listed gaming company that is meaty enough to attract attention, but its B2B business doesn’t fit well with 888’s customer-focused strategy.
888 may now have to look abroad for its future partner.
