Caesars shoots decrease than anticipated with a bid from William Hill of $ three.7 billion
The Caesars Palace Casino from Caesars Entertainment Corp. is located in Las Vegas, Nevada.
Jacob Kepler | Bloomberg | Getty Images
Caesars is in advanced takeover talks with William Hill, who valued the British bookmaker at £ 2.9 billion ($ 3.7 billion) and put the casino operator in full control of a rapidly growing US sports betting and online business would give.
Caesars was considering offering 272 pence per share, and William Hill's board of directors was inclined to recommend such an offer to shareholders, the companies said Monday.
William Hill's shares soared more than 312 pence each Friday after it was revealed they had received separate offers from Caesars and the buyout group Apollo.
However, those gains were returned on Monday, leaving the stock at 273p, suggesting that now, even if Apollo counters, investors are now expecting a far lower price.
Caesars only owns 20% of its U.S. joint venture with William Hill, but the deal is based on a Caesars casino presence and brand name that the casino owner said would have the right to give in the event of an Apollo buyout cancel.
The offer significantly undervalues the company, but it appears due to the terms of the joint venture and the fact that William Hill's board of directors said it would make sense to recommend the offer, with limited scope for a competitive bidding process, analysts at Jefferies.
Apollo did not immediately respond to Reuters' request for comment outside of normal business hours.
Stifel analyst Bridie Barrett said the broker's valuation range for William Hill is between 270 and around 400 pence.
"While ending the relationship with William Hill under new ownership makes little business sense, it increases the risk of a private equity acquisition … a price at the high end of our range is unlikely," said Barrett.
William Hill shares were trading near two-year highs before the proposals were announced, after falling to their lowest level in 20 years in March.
It has offset domestic regulatory pressures by expanding in the U.S. and partnering with CBS Sports and ESPN to capitalize on the relaxation of sports betting rules there.
To fund the deal, Caesars said he would raise equity and raise $ 2 billion in new debt that is secured against William Hill's non-US corporations.
Caesars said the expanded U.S. sports and online gaming business could generate net sales of between $ 600 million and $ 700 million for full year 2021.
The offer comes shortly after Eldorado Resorts completed the purchase of larger rival Caesar for approximately $ 8.5 billion, creating a new competitor for larger players like Las Vegas Sands and Wynn Resorts.