William Hill Takeover Acquisition of 888 Holdings In the Offing, Possibly

on February 12, 2015
William Hill 888 Holdings acquisition

UK gaming giant William Hill has reportedly made an offer to buy out 888 Holdings, presumably to bolster the company’s online offerings. (Image: Leon Neal/AFP/Getty Images )

William Hill may be one of the most revered names in the United Kingdom’s gambling industry, but there’s one area where the gaming comglomerate hasn’t had quite the same level of success: the Internet. That makes it only natural that the bookmaker would try to expand its online operations.

Perhaps that’s why the company is now attempting a takeover of 888 Holdings, the parent company of 888 Poker and other gambling sites under the 888 brand.

888 Holdings confirmed initial reports from The Times that William Hill had approached the company about the possibility of buying the firm, though 888 said that the talks are only preliminary.

“The board of the company confirms that it received an approach regarding a possible offer for the company by William Hill,” 888 wrote in a statement. “There can be no certainty, however, that any firm offer will be made.”

Pricing Concerns Could Scuttle Deal

According to the Times report, William Hill had offered up about £750 million ($1.14 billion) for 888, with a preliminary agreement being reached for the firm to buy out the company for approximately £2.10 ($3.20) per share.

However, there was also speculation that at least one of the Israeli founders of 888, perhaps the Shaked family, wanted a much higher price: something in the range of £3 ($4.57) per share.

If those pricing concerns end up scuttling a potential deal, it wouldn’t be the first time that’s happened in a proposed takeover of 888. In 2011, Ladbrokes, another major UK bookmaker, tried to purchase 888, but that deal fell apart over disagreements on the pricing of the company.

Shares for 888 were up 21 percent to about £1.75 ($2.67) in afternoon trading earlier this week on the London Stock Exchange, while William Hill saw shares dip slightly. Volume was exceptionally high for 888, as there were nearly five times as many trades as it would normally see in a given day.

William Hill Would Pay Premium to Acquire 888

However, even at that inflated price, William Hill would still be paying quite a premium if the terms of its offer was reported accurately. The company is likely willing to go above the current share price, because the two firms would work well together: William Hill may be able to consolidate systems and take advantage of synergies in order to save millions in overhead if it could integrate 888 into its existing business.

On the other hand, paying the even higher price that the Shaked family is rumored to be asking for might be a bridge too far.

“I think there is a good chance that the deal may not go through,” said Panmure Gordon analyst Karl Burns. “It would stretch their balance sheet to a degree that they may have to raise capital as well.”

Still, the acquisition would make sense for William Hill, as many primarily land-based gaming companies have looked for ways to increase growth, particularly on the Internet.

Both William Hill and 888 already operate in most major European regulated markets; however, while 888 is one of the larger online operators, William Hill typically licenses software from other companies to run its more modest Internet operation.

“We believe an acquisition of 888 could be in line with William Hill’s strategy [of] improving technology, international diversification and omni-channel,” said analysts at UBS.