Caesars has agreed to buy William Hill for $3.7 billion in cash.
The casino giant emerged as the front-runner for the takeover this week despite competition from investment firm Apollo Global Management.
The deal is expected to close in the second half of 2021, pending regulatory and competition approvals.
“The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect,” said Caesars Entertainment CEO Tom Reeg.
Expanded partnership for Caesars and William Hill
The two partners already operate a US sports betting joint venture. But Caesars said it wanted to broaden the deal to maximize its potential.
The combined sports betting and online gaming business could generate $600-$700 million in pro forma net revenue in FY2021.
And Caesars could potentially spin that business out on its own. The public markets are currently granting online gambling businesses huge valuations.
The agreement also kickstarts a second M&A process, as Caesars now looks to sell off Hill’s non-US business. That was 93% of group revenues in the first half of 2020.
“Caesars’ intention is to seek suitable partners or owners… who will be focused on the longer-term ambitions of those businesses and for the benefit of its customers,” the company noted.
Assets up for grabs include William Hill UK online, the UK retail estate, and the international part of the business, which is combined with Mr. Green.
Betfred is interested in the retail estate, according to The Times.
These divisions combined for around $575 million in 2019 revenue.
It’s another part of a busy year for Caesars, which recently wrapped up a merger with Eldorado Resorts.
Best option for William Hill
“The William Hill Board believes this is the best option for William Hill at an attractive price for shareholders,” said Roger Devlin, chairman of William Hill.
“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 US opportunity given intense competition in the US and the potential for regulatory disruption in the UK and Europe.”
Positives for Caesars
In a statement, Caesars laid out its strategic rationale for the takeover, including:
- Unified wallet and customer experience across sportsbook and online casino.
- Chance for William Hill to cross-sell to 60 million customers in Caesars’ rewards database.
- Broader market access.
- Improved attractiveness as a potential partner for media companies.
The $3.7 billion price tag marks a 58% premium to William Hill’s share price the day before the Caesars offer was made.
Caesars share price was up 3% to $56 in pre-market trading following the news.