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Rank Group, 888 Push for William Hill Talks After 3.16 bill Bid Rejected

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Published on:
Aug/10/2016

(Reuters) - Casino and bingo hall operator Rank Group Plc (RNK.L) and online gambling company 888 Holdings Plc (888.L) called on Wednesday for talks with the board of William Hill Plc (WMH.L) after their proposed joint bid was rejected by the British bookmaker.

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William Hill spurned their 3.16 billion pound offer on Tuesday, saying the 16 percent premium "substantially undervalued" the business.

Rank and 888 said in a statement laying out their case for the merger that the enlarged group would be "the UK's largest multi-channel gambling operator by revenue and profit", with 92 percent of its business from regulated markets.

William Hill is set to lose its leading market position to a merger of Ladbrokes (LAD.L) and Coral and has failed to keep pace with rivals in fast-growing online gambling.

Gambling faces higher taxes and tighter regulation, and a series of mergers has intensified competition as firms market themselves to younger sports fans betting via mobile apps.

Under the proposed terms, William Hill's shareholders would hold 44.7 percent of the combined group, 888's 25.7 percent and Rank's 29.6 percent.

The bidders said Rank's chief executive Henry Birch would become CEO of the new group and Itai Frieberger, current 888 boss, CEO of Digital and the deal would result in 100 million pounds in savings a year from lower third party fees, reduced IT spending and consolidation of central costs.

If the proposed three-way deal goes ahead, 888 and Rank said they would first merge, with Rank shareholders getting 1.086 new 888 shares for each share held.

SHAREHOLDERS ON BOARD

The duo said execution risk was "substantially" mitigated by support for the proposal from 888's Principal Shareholder Trusts, who hold in aggregate 50.7 percent of the group and Rank’s largest shareholder, Malaysia's Guoco Group (0053.HK), which holds in aggregate 56.1 percent of Rank.

Guoco is the Hong Kong based investment company of Malaysian billionaire Quek Leng Chan who controls Hong Leong Financial Group Bhd (HLCB.KL).

Rank and 888 have offered to buy William Hill for 199 pence in cash and 0.725 new 888 shares, valuing it at 364 pence a share based on the closing price of 888 on Aug. 5.

"The combination of 888 and Rank and the acquisition of William Hill will be inter-conditional," they said.

Rank and 888 said that they expected high cash generation by the combined group to result in rapid deleveraging and a net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio of between 2.5 and 3 times in 2018.

They also anticipate a dividend payout ratio of 40 percent.

Rank shares closed down 1.6 percent at 207.7 pence on Tuesday, while 888 was 1 percent lower at 217 pence and William Hill's stock fell 1.4 percent to 324.5 pence.

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