Could William Hill Buy 888 in 2015?

From the beginning of 2015, William Hill and 888 were subtly engaging in low-key takeover talks. A successful conclusion would have resulted in William Hill agreeing a deal to complete an acquisition of 888. The deal would have vastly strengthened the UK bookmaker’s online presence in the global gambling industry.

As of March 2015, there is a period of stasis in a possible William Hill takeover of 888. Based on reports from media outlets like BBC and the Financial Times, it is said that the talks were ended halfway through February. The reports states that one 888 shareholder considered the offer of William Hill to be too low.

888 Valued at £700m by William Hill

In attempting to purchase 888, William Hill had presented an offer of 200 pence per share. Overall, that offer would have priced 888 at approximately £700 million. When announcing news of the breakdown, 888 were quote as saying that ‘a significant difference of opinion’ brought about the rejection.

As is often the case in mergers and acquisitions, the news that William Hill and 888 were in discussions had an impact on share prices. For 888, there was a beneficial rise of 20% when the media reports emerged. However, there was a huge fall of 14% as news of the verbal breakdown emerged – meanwhile, William Hill shares increased by 0.6%.

Why Did the 888 Takeover Fail?

For the answer to this question, it is worth looking at a key finding revealed by the Times. In the newspaper’s report on the takeover, it explained that the Shaked family, a principal owner in 888, rejected the 200 pence per share offer because it was not high enough. The Shaked is believed to be holding out for a colossal payout of 300 pence per share, which would be a 50% increase on William Hill’s original offer.

As of 3 March 2015, the approximate value of 888 is £567 million, based on share price. On that valuation, William Hill was being quite generous in offering £133 million extra to reach £700 million. However, that value was far beyond the £1.05 billion desired by the Shaked family.

Basically, the Shaked family wanted an offer that was too good to refuse. But why? Well, 888 did so because it has no reason to sell. Although the share price could be higher, 888 does not have a penny of debt. In fact, the operator has a credit surplus, and spends the surplus by making investments.

888 Takeover Unlikely

Historically, Ladbrokes made the last definite takeover for 888 in 2006. The rejection of two offers from British gambling operators perhaps raises the question of a political issue, but 888 has already committed to the new legislation of the UK Gambling Commission.

888 is in incredible financial condition, which eliminates pressure as a catalyst for clinching a deal. To summarise, only a groundbreaking offer from William Hill is going to work. Therefore, it is unlikely that an 888 takeover will be completed in 2015.

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