William Hill shares drop on disappointing Caesars bid valuation

Shares in William Hill are trading sharply lower this morning having surged last week after it confirmed separate talks with buyout group Apollo Global Management and with Caesars Entertainment.

On Monday, Caesars and the UK bookmaker issued a joint statement saying they are in ‘advanced’ acquisition talks, which would value William Hill at £2.9 billion, lower than analysts’ expectations. The deal would give the US casino operator full control of William Hill including its US sports-betting business and online operation. Caesars would fund the deal by raising new equity and through $2 billion of new debt. The two companies said the offer being considered was 272 pence a share for William Hill.

Caesars’ CEO Tom Rees said, ‘The opportunity to combine our land based-casinos, sports betting and online gaming in the US is a truly exciting prospect.’

Russ Mould, investment director at AJ Bell said, ‘an approach for Hills is entirely understandable, even allowing for its woes in the UK, where limits to stakes on Fixed-Odds Betting Terminals, increased taxes and stricter regulation have hit its high street operations hard. Further hampered by the pandemic and cancellation of sports upon which punters could bet, the bookie would have made a loss in the first half of 2020 had it not been for a VAT refund, thanks to a reassessment of the value of its betting shops. The FTSE 250 firm also raised £224 million via a placing priced at 128p a share, to shore up its balance sheet.’

Caesars already has a joint venture with William Hill in the United States, giving the UK bookmaker first rights to offer sports betters in Caesars’ 54 casinos. In return Caesars owns 20% of William Hill’s US operation. This JV was struck between El Dorado and William Hill originally before its takeover of Caesars for $17.3 billion in July. In the event that Apollo manages to acquire William Hill, Caesars said it reserves the right to terminate its arrangement with the UK company.

There has been a lot of M&A activity in the betting sector in recent years. In 2019, William Hill acquired Mr Green, in 2018 GVC acquired Ladbrokes-Coral, in 2016 Paddy Power merged with Betfair (and has since rebranded as Flutter Entertainment) and in 2015 William Hill tried by failed to buy 888. William Hill has been a publicly traded company since its flotation on the London Stock Exchange in 2002.

William Hill: technical analysis

Taking a look at the chart of William Hill, we saw a decisive break above the 100% fibonacci retracement resistance level in September with a gap higher followed by a series of doji indecision candles to mark a period of sideways trade. However last week’s deal speculation saw the shares surge sharply higher but today’s disappointing valuation from Caesars has seen William Hill suffer a sharp decline. The next key resistance on the upside appears to be at the psychological round number at 300 pence, which it broke and closed above on Friday but has since fallen back below. Meanwhile on the downside look for support at 240 pence, the 127.2% fibonacci level. A push below might pave the wave for some further possible consolidation.