William Hill Confirms Receiving Apollo, Caesars Takeover Overtures

Posted on: September 25, 2020, 10:10h. 

Last updated on: September 25, 2020, 12:09h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of William Hill (OTC:WIMHY) are higher by 40 percent in midday trading Friday. That’s after the sportsbook operator confirmed private equity firm Apollo Global Management (NYSE:APO) and Caesars Entertainment (NASDAQ:CZR) each approached the UK-based company about a potential takeover.

William Hill takeover
The William Hill sportsbook at Monmouth Park in New Jersey. The stock soared today on takeover chatter. (Image: Wall Street Journal)

That comes after weeks of speculation regarding the fate of the British bookmaker, specifically its flourishing US business. William Hill said it has received “separate cash proposals” from Apollo International Management and Caesars. The potential target did not say how much the suitors are offering.

Discussions between William Hill and the respective parties are ongoing,” according to a statement issued by the British bookmaker. “There can be no certainty that any offer for William Hill will be made, nor as to the terms on which any offer might be made.”

Caesars making a run at William Hill isn’t surprising for multiple reasons. The companies have been in talks for weeks about a deal that would combine the sportsbook operations with the former’s iGaming and sports betting units and spin a percentage of the combined entity out to public investors. Second, William Hill runs Caesars’ sportsbooks, and Harrah’s operator owns 20 percent of the British firm’s US business.

Apollo Possible Wildcard

The introduction of Apollo is a boon for William Hill investors. As today’s price action in the name suggests, a bidding war is great for the target’s shareholders.

It’s not necessarily bad for Caesars, either. Although there’s the potential for the Bally’s operator to miss out on an outright marriage with its sportsbook partner, Caesars’ stock is still up more than six percent today. Recently, some investors took stakes in William Hill with the intent of pushing for a sale, displaying no preference in terms of suitors.

Apollo being part of this equation is interesting for another reason. It’s the private equity company that partnered with TPG in 2008 to acquire the company then known as Harrah’s, which would eventually become Caesars. The two investment giants paid more than $30 billion for Harrah’s. It was an investment that almost immediately turned bad, as the debt-laden gaming entity filed for bankruptcy protection in 2015.

Apollo and TPG held Caesars’ equity until early 2019. But they liquidated those stakes prior to Eldorado Resorts making a $17.3 billion takeover offer for the Caesars Palace operator. Apollo has other gaming investments, notably a position in Italy’s Gamenet Group.

Worst Case Scenario Still Appealing

Some analysts believe hope isn’t lost for Caesars to wring some benefit out of its relationship with William Hill, even if Apollo wins the bidding war.

In a note to clients today, Roth Capital analyst David Bain said the private equity firm is likely more interested in William Hill’s European business, and that the worst case scenario for Caesars is merely a delay in combining with the UK company’s US operations and spinning off that unit.

“We argue there is no significant value built into CZR for such at this point,” said Bain. “On the upside, CZR could (get) 100 percent of the value of the combined potential interactive company at a significant discount to what US investors would give it credit for.”

The analyst estimates combining Caesars online casinos and sports betting businesses with William Hill USA is worth $13 billion.