Caesars bid to acquire William Hill was announced last month to much fanfare, but there’s some evidence Hill shareholders might not accept the offer.
Caesars made the bid at 272p ($3.45) per share, but Hills currently trades at 280p even after a relatively weak set of Q3 results.
In other words, the market is pricing in a chance the CZR offer is rejected. That might force Caesars to make a higher offer, or allow other bidders to enter the frame — or William Hill could still spin out the US business itself.
Several hedge funds have also started acquiring Hills shares at prices above the offer level.
Who is buying William Hill?
New York hedge fund HG Vora added around 1.8% of the WMH float after the deal was announced at 277p. The HG Vora fund currently owns 9% of William Hill, having built much of the position at lower prices.
Investment firm Millennium Management has also been building a long position in recent days at 278p a share.
“I think [shareholders] will vote the deal down and demand something that starts with a ‘3’,” said another UK-based equities analyst.
Who blinks first?
Some investors believe the Caesars offer undervalues William Hill when compared to the public valuations of US sports betting companies.
Third Bridge senior analyst Harry Barnick said some Hills shareholders were underwhelmed by the Caesars offer when first announced. However, they were somewhat backed into a corner by Caesars’ threat to terminate its US joint venture with William Hill if it found another suitor.
“It would be very difficult for WMH to find a partner that provides as much access to the US market as Caesars,” Barnick said. “In comparison, Caesars has options to seek additional partners and could clearly back out of the current equity share. The power dynamics at play are not even.”
It’s unclear if Caesars would actually terminate the JV, as it would be forced to find a new operator for its sportsbooks across the US.
Shareholder opinion divided
Of course some major Hills shareholders would stand to benefit from the transaction. Betfred founder Fred Done is the single largest shareholder at 6%, and could scoop up any William Hill betting shops that Caesars would offload after the deal.
Done would also make massive profits on his William Hill stake, after acquiring much of it at around 129p back in March.
William Hill saw US revenue climb 10% in Q3.