888 strikes £2.2bn Caesars deal for William Hill’s non-US business

William Hill

888 Holdings CEO Itai Pazner has hailed the £2.2bn transformative deal that the online gaming giant has done with Caesars Entertainment to buy the non-US business of William Hill.

The deal represents some interesting business by US gaming giant Caesars Entertainment, which only bought the William Hill Group in April for £2.9bn. This disposal now means it essentially acquired the William Hill US assets for £700m in a market where valuations are high in anticipation of massive sports betting growth. 

Pazner commented: “The acquisition of William Hill International is a transformational and hugely exciting moment in 888’s history. This transaction will create one of the world’s leading online betting and gaming groups with superior scale, exceptional brands, increased diversification, and a platform for strong growth.

“William Hill is an iconic sports brand, making it the ideal complement to 888, one of the leading global online gaming brands. Our strategies are also complementary, being digitally led, customer focused, and committed to player protection and raising industry standards around safer gambling. We are also excited about the opportunities that the Retail business provides and see significant brand benefits to the Enlarged Group from its large estate.”

The deal is expected to deliver ‘significant operating efficiencies’, including pre-tax cost synergies of at least £100 million per year, which 888 says will lead to improved profit margins. On a pro forma normalised basis the Enlarged Group’s annual revenue and adjusted EBITDA in 2020 would have been $2.5bn and $464m, respectively.

888 Chair Lord Jon Mendelsohn added: “This acquisition is an incredible opportunity to combine our world-class gaming brand with a unique and iconic sports betting brand to create a global leader in the online sports betting and gaming industry. We believe the acquisition will create significant value for shareholders, creating a combined business with leading technology, products and brands across sports betting, gaming and poker, supported by top quality management talent from both businesses.”

888 said that the acquisition is expected to deliver ‘substantial value creation’ for shareholders from pre-tax cost synergies of at least £100m per year, along with potential revenue upside from an enhanced customer proposition and product offerings. It currently expects to cumulatively achieve approximately £10m of such synergies in 2022, £54m in 2023, £69m in 2024, and £100m in 2025, including £15m in capex synergies.

William Hill International CEO Ulrik Bengtsson said that the William Hill and 888 strategies are highly complementary with an absolute focus on the product and customer experience. “Scale is increasingly important in our sector and the combination of the businesses will provide a powerful alignment of brands and technology. 

“This transaction is a testament to the progress William Hill has made over the last two years, our unrelenting focus on customer, team and execution and, most importantly, the dedication and commitment of William Hill colleagues. I am immensely proud of what we have achieved and I would like to take this opportunity to thank all of our colleagues who have made this possible. I look forward to working with 888 as we transition to the new ownership structure.”

In order to fund the acquisition, 888 has obtained fully committed debt financing from J.P. Morgan, Morgan Stanley and Mediobanca of approximately £2.1bn, which includes approximately £1.6 billion of term loans and approximately £500m of bridge loans/senior secured notes. 888 has also obtained a fully committed revolving credit facility of £150m.

To create a more beneficial long-term capital structure, 888 expects to raise approximately £500 million of gross proceeds by issuing new equity via a capital raise to be undertaken at an appropriate time, such that pro forma net leverage ratio is under 4x.

Tom Reeg, CEO of Caesars Entertainment, Inc, commented on the transaction: “I’d like to personally thank Ulrik and all of the team at William Hill for their professionalism and dedication while they have been part of Caesars and particularly during the sale process. I am delighted that, as we said we would when we announced the offer for William Hill PLC, we have found an owner for the William Hill business outside the US which shares the same objectives, approaches and longer-term ambitions of that business.”