10th Aug 2016 16:05
LONDON (Alliance News) - 888 Holdings PLC and The Rank Group PLC on Wednesday said they believe a merger with fellow gaming company William Hill PLC would represent a "compelling value creation" opportunity for William Hill, a day after William Hill rejected the takeover offer proposed by the pair.
On Tuesday, William Hill revealed that it had received a proposal under which 888 would act as the acquiring entity to create BidCo, which would offer to buy William Hill for 199 pence in cash and 0.725 newly issued BidCo shares per William Hill share. This would result in William Hill shareholders owning 44.7% of the combined group, while Rank Group would own 29.6% and 888 would own 25.7%.
The proposal represented an estimated value of 364p per William Hill share, with 45% of the proposed consideration in the form of BidCo shares.
However, William Hill rejected the offer on the grounds that it "undervalued" the company. It added that it did not believe that a combination of William Hill with 888 and Rank Group would enhance its strategic positioning or deliver superior value for shareholders compared to its independent strategy.
On Wednesday, 888 and Rank Group released a follow-up statement saying that they believe a merger between the three companies would create a "significant and transformational force" in the global betting and gaming industry, noting that it would be the UK's largest multi-channel gambling operator by revenue and profit.
The pair said they have identified cost savings of at least GBP100 million per year through the merger, the benefits of which would accrue to all shareholders, as well as revenue synergies, increased marketing effectiveness, effective entry into new markets, and mitigation against any adverse regulatory changes.
Cost synergies would arise from a reduction in fees payable to third parties, IT platform cost savings, integration of digital teams, marketing spend optimisation, leveraging consolidated payment volumes to attract better rates from payment service providers and consolidation of corporate and central costs.
888 and Rank Group anticipate one third of synergies being achieved by the end of 2018, 90% by the end of 2019 and the full 100% by the end of 2020, assuming completion of the merger by the end of 2016.
The realisation of identified synergies would result in one-off cash costs of GBP69 million, largely incurred in 2017 and 2018.
Revenue synergies would arise from cross-selling of customers between brands, products and channels, rebranding opportunities and customer experience optimisation.
They added that if a deal were to go through, they would expect a dividend policy of approximately 40% payout ratio.
Rank Group and 888 proposed that current Rank Group Chief Executive Henry Birch would become CEO of the enlarged group, while 888 CEO Itai Frieberger would become CEO of Digital.
According to the pair, 888's principal shareholder trusts and Rank Group's largest shareholder have indicated their support for the proposal.
Meanwhile, Rank Group shareholders would receive 1.086 new 888 shares for each Rank Group share held.
The pair said they welcome the opportunity to engage with William Hill "on a constructive basis with the goal of consummating a recommended transaction".
The combined group would "bring together a complementary and attractive combination of retail and digital brands and proprietary technology, content and products across sports betting, casino, poker and bingo", Rank Group and 888 said.
Shares in William Hill closed up 0.04% at 329.15p on Wednesday, while Rank Group closed down 1.6% at 207.70p and 888 closed down 1% at 217p.
By Karolina Kaminska; [email protected] @KarolinaAllNews
Copyright 2016 Alliance News Limited. All Rights Reserved.
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