William Hill rejects second bid from 888 and Rank

15 August 2016

William Hill has rejected a revised £3.1 billion (€3.6 billion/$4.0 billion) takeover approach from 888 and Rank, saying it still "substantially" undervalues the company.

Rank and 888 made a second offer for the gaming operator yesterday (Sunday), but William Hill said the only change to the original proposal put forward last Tuesday was that its shareholders would now own 48.8% of the combined group, up from an initial 44.6%.

Hills said the revised bid values the company at 352 pence per share, slightly up on the initial 339 pence.

However, it still regards the offer as too low, and repeated its concerns about debt levels assumed by the proposed BidCo combined entity.

Gareth Davis, chairman of William Hill, said: "This revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed. Therefore, the board sees no merit in engaging. As we have said before, this is highly opportunistic and complex and does not enhance the strategic positioning of William Hill.

“The board continues to believe we have a strong team to deliver superior value to our shareholders and trading at the start of the second half gives us renewed confidence in our stand-alone strategy."

The revised takeover proposal would see William Hill shareholders receive 199p in cash and 0.86 of shares in BidCo for each share they own.

Rank and 888 have said that the proposed new combination would create the UK's largest multi-channel gambling operator, worth £4.5bn, with cost savings of £100 million a year.

However, Hills said the revised proposal did not allay its debt fears, highlighting that the combined group would operate with substantially increased leverage of approximately £2.2 billion and subsequent high interest charges.

A report in the Financial Times newspaper said a net debt to earnings figure of 3.75 times in the first year would be far ahead of most other companies in the gambling industry, with Ladbrokes and Coral each currently at around 2.5, William Hill at 1.4 and Paddy Power Betfair at 0.18. 

However, Rank and 888 said they are confident that “in the current low interest rate environment” the debt financing required to fund the improved proposal “can be raised at attractive rates”. They envisage net debt to earnings of around 2.5-3.0 times in 2018.

Henry Birch, chief executive of Rank, said in a statement today (Monday): "With a 48.8% share in the combined business, the largest proportion of the benefits would accrue to William Hill shareholders (as well a significant cash payment), and we hope to engage the William Hill board in constructive discussions to deliver a deal that makes compelling strategic sense for all three businesses."

Related article: William Hill hits out at takeover proposal