William Hill tables £242m offer for MRG

31 October 2018

William Hill has tabled an offer of SEK2.82bn (£241.8m/€270.9m/$307.4m) to acquire Mr Green & Co (MRG) in a move that CEO Philip Bowcock believes will allow the company to become “a more digital and more international business”.

The offer on the table is for SEK69 in cash per share in MRG, with the board of directors at MRG recommending that shareholders accept the bid. MRG said that 40.4% of shareholders have already signed irrevocable agreements backing the bid.

Speaking to iGamingBusiness.com about the offer this (Wednesday) morning, MRG chairman Kent Sander said that the final decision will come down to the shareholders, but he realises the benefits of having a larger business in the modern market.

“We believe that size matters in the globalisation of the iGaming industry,” he said. “But the decision is up to the shareholders; 40.04% of the shareholders have already signed irrevocable agreements.”

Hills, which does not currently hold any shares in MRG, has made the offer via its William Hill Holdings-controlled affiliate.

Both companies expect to publish an official document offer at the beginning of December, with the acceptance period to run from December 10 to January 11, in the hope of completing the deal shortly after.

Ulrik Bengtsson, chief digital officer at William Hill, will be responsible for leading the integration of MRG within the group, due to his background in working with Nordic online gaming businesses during his time at Betsson.

Bowcock (pictured) added in a statement: “This proposed acquisition accelerates the diversification of William Hill – immediately making us a more digital and more international business.

“MRG will provide William Hill with an international hub in Malta with market entry expertise and strong growth momentum in a number of European countries. William Hill will move from a single brand to a suite of brands that can maximise growth opportunities moving forward in new and existing markets.”

The offer comes after MRG last week posted a very healthy trading update in which it announced a 50.9% year-on-year increase in revenue to SEK445.2m for the three months to the end of September.

Organic growth of 36.4% was partly driven by a 72.3% rise in customer deposits, with earnings before interest and deductions rocketing by 49.4% to SEK75.5m.

In recent months, Hills has been focusing on expanding its business in the US, striking a series of deals in the wake of the Supreme Court ruling on PASPA that has opened up legal sports betting to more states as a result. However, the offer for Sweden-headquartered MRG demonstrates Hill’s desire to also grow its European business, particularly in the digital sector.

In a statement outlining the offer, Hills highlights a number of “core attributes” at MRG that it believes will “enhance the William Hill business and strategy”.

These include combining MRG’s existing international hub in Malta with its own operational expertise in establishing a presence in new markets, which it said will increase its online international footprint and growth potential.

Hills also said MRG's online-only business will increase its share of online and international revenue and profits, as well as reduce its exposure to the UK market.

The bookmaker expects online revenues to climb from 42% of total revenue to around 47%, while the proportion of international revenues will rise from 14% to 21%.

Hills also moved to allay any initial fears over job losses as a result of the pending deal, saying “prior to completion of the offer, no decision will be taken on any material changes to MRG's employees and management or to the existing organisation and operations, including the terms of employment and locations of the business”.

The bookmaker added: “Following completion of the offer, a careful review of the capabilities and needs of the new combined operations will be undertaken in order to determine the optimal management and employee structure for future success of the group.”

However, analyst Regulus raised doubts over the deal, questioning whether MRG as a "largely grey market operator" would help Hills.

Regulus said: "Since WH is facing the cash flow and structural impact of B2 loss combined with increased RGD, the lack of growth in underlying retail, the struggle to regain online market share in the UK in a slowing growth and tougher regulatory environment, the inability to gain traction in Italy and Spain, and the retreat from Australia, management had to do something (other than promise in the US).

"However, we are not sure that material additional exposure to grey markets, with significant and visible operating pressures, at a double digit multiple of pre-impact cash flow is the right something..."