(Bloomberg) -- Apollo Global Management Inc. and Caesars Entertainment Inc. have approached U.K. gambling group William Hill Plc about a potential takeover, the latest consolidation move in the betting industry.
William Hill has received separate cash proposals from the two groups, it said in a statement Friday after Bloomberg News reported on the Apollo approach. Talks are ongoing and there is no certainty that a formal offer will be made, William Hill said.
Shares of the bookmaker surged as much as 41% in London trading on Friday, an intraday record. The company now has a market value of about 3.1 billion pounds ($4 billion). Rival betting companies also rose, with Flutter Entertainment Plc gaining as much as 6.7% and GVC Holdings Plc advancing as much as 15.5%. Shares in Caesars jumped as much as 8.4%.
Apollo has a history of investments in the gambling sector. It teamed up with TPG for a 2008 leveraged buyout of Harrah’s Entertainment Inc., which was later renamed Caesars. Last year, it also acquired a stake in Italy’s Gamenet Group SpA.
William Hill is already a partner of Caesars and the two are in discussions about merging some of their operations in the U.S., where the U.K. company is looking to build scale. The British group recently completed the purchase of CG Technology, a sports-betting outfit spun off from Cantor Fitzgerald LP, in a deal that gave it sports book assets in Nevada.
“The U.S. is the key attraction with William Hill” and “a value of about 300p per share is easily reached at present,” Gavin Kelleher, an analyst at Goodbody Stockbrokers, wrote in a note to clients Friday. “Another interesting angle is the plans Apollo and/or Caesars have for the non-U.S. part of William Hill.”
Apollo made an initial written proposal on Aug. 27, and then both the buyout firm and Caesars made further approaches, William Hill said in Friday’s statement. Both suitors have until Oct. 23 to announce the intention to make a firm offer or walk away under U.K. takeover rules.
Founded in 1934, William Hill is one of the world’s largest sports betting companies with offices in 10 countries, according to its website. Under Chief Executive Officer Ulrik Bengtsson, who took over a year ago, the company is focused on building its online businesses. Bengtsson was previously William Hill’s chief digital officer.
William Hill has bet on America to deliver growth in the coming years, after the U.S. Supreme Court lifted a ban on sports betting in May 2018. That looked even more attractive as business in its home market of the U.K. was slapped with regulations like stake limits on betting machines -- a rule which rendered hundreds of its stores unprofitable and led to 700 being closed. Further tightening of U.K. gambling rules is being considered, while William Hill’s recent earnings have also been hit by Covid-19 shutdowns of sports events and the remaining stores.
William Hill’s market value has been eclipsed by European peers also shifting aggressively toward the U.S. and online gambling. In 2015 it was valued higher than Flutter, which owns the popular Paddy Power brand. It now commands a fraction of its rival’s market capitalization since Flutter completed a combination with Canada’s Stars Group Inc. in May and became the world’s largest online gambling company. Both Flutter and William Hill issued equity in the last few months to capitalize on the U.S. market.
The hedge fund HG Vora Capital Management LLC owns a roughly 8% interest in William Hill, having recently increased its holding, a person with knowledge of the matter said Friday. This means HG Vora has overtaken Silchester International Investors LLP as the bookmaker’s biggest shareholder, according to data compiled by Bloomberg.
HG Vora has been supportive of consolidation in the gaming industry, the person said, asking not to be identified as the information is private. A representative for HG Vora declined to comment.
(Updates with details of HG Vora’s stake in William Hill in final paragraph)
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