US casino giant operator Caesars Entertainment announced Monday it was in advanced negotiations to acquire UK-based sports betting company William Hill. Caesars outlined it was about to make an official £2.9 billion ($3.7 billion) cash takeover bid for the bookmaker.
At the end of last week, William Hill responded to speculation that it was at the center of a potential bidding war, confirming it received separate cash offers from Apollo Global Management, Inc. and Caesars Entertainment, Inc., as the lure of the growing sports betting market in the US is prompting casino operators to compete for a piece of it.
Reasonable Premium on Current Market Evaluation
The £2.9 billion cash proposal from Caesars, though yet unofficial, represents a 25% premium on all shares, compared to the market daily close on Thursday, as it pays 272 pence per share. But after the announcement from William Hill on Friday its share market price soared 33% and closed above the proposed price per share by Caesars.
The board of directors of the bookmaker company outlined the proposed offer “is at a price level they would be minded to recommend to William Hill shareholders”, as any offer for the acquisition of the operator should be subject to their approval.
Caesars Already Involved with William Hill
Compared to its potential rival, private equity fund Apollo, Caesars has a competitive advantage as it holds 20% in a joint sports betting venture with William Hill in the US. Under the terms of the partnership deal, the sportsbook operator acquired access to operate through Caesars properties in states where sports betting is legalized. If Caesars and William Hill merge, the latter would also get access to Caesars’ customer loyalty program which, by the end of 2019, comprised of 60 million members.
The casino giant outlined that in the case William Hill is acquired by Apollo, the terms of the joint venture allow them to end market access rights for the sportsbook provider. Caesars also noted it is only interested in keeping the US assets and betting technology of the bookmaker and would look to sell its UK business along with other markets outside of the US where it relies on retail operations.
US Sports Betting Market
Since the 2018 Supreme Court ruling allowed other states besides Nevada to introduce sports betting, 22 states and the District of Columbia legalized wagering on sports, and the proposed deal would be the latest in a series of restructuring within the industry which is expected to grow to $18 billion in revenue by 2025.
Caesars is among the top three players in terms of market share as projected by some analysts, with the other two being the owner of the FanDuel and FoxBet brands, Flutter Entertainment, and fantasy sports operator DraftKings.