888 acquires ‘hugely exciting’ £2.2bn William Hill International

888 Holdings CEO Itai Pazner has confirmed the ‘hugely exciting acquisition of William Hill’s non-US business from Caesars Entertainment for £2.2bn. 

The deal, news of which broke earlier this week, is expected to deliver ‘significant operating efficiencies’, including pre-tax cost synergies of at least £100 million per year, which 888 says will lead to improved profit margins. On a pro forma normalised basis the Enlarged Group’s annual revenue and adjusted EBITDA in 2020 would have been $2.5bn and $464m, respectively.

Pazner commented: “The acquisition of William Hill International is a transformational and hugely exciting moment in 888’s history. This transaction will create one of the world’s leading online betting and gaming groups with superior scale, exceptional brands, increased diversification, and a platform for strong growth.

“William Hill is an iconic sports brand, making it the ideal complement to 888, one of the leading global online gaming brands. Our strategies are also complementary, being digitally led, customer focused, and committed to player protection and raising industry standards around safer gambling. We are also excited about the opportunities that the Retail business provides and see significant brand benefits to the Enlarged Group from its large estate.”

Pazner added that 888 has been ‘incredibly impressed’ with the William Hill management team and he looks forward to creating great products for customers, driven by best in class technology, powerful brands, and benefitting from our significantly enhanced scale.

888 Chair Lord Jon Mendelsohn added: “This acquisition is an incredible opportunity to combine our world-class gaming brand with a unique and iconic sports betting brand to create a global leader in the online sports betting and gaming industry. We believe the acquisition will create significant value for shareholders, creating a combined business with leading technology, products and brands across sports betting, gaming and poker, supported by top quality management talent from both businesses.”

William Hill International CEO Ulrik Bengtsson said that the William Hill and 888 strategies are highly complementary with an absolute focus on the product and customer experience. “Scale is increasingly important in our sector and the combination of the businesses will provide a powerful alignment of brands and technology. 

“This transaction is a testament to the progress William Hill has made over the last two years, our unrelenting focus on customer, team and execution and, most importantly, the dedication and commitment of William Hill colleagues. I am immensely proud of what we have achieved and I would like to take this opportunity to thank all of our colleagues who have made this possible. I look forward to working with 888 as we transition to the new ownership structure.”

In order to fund the acquisition, 888 has obtained fully committed debt financing from J.P. Morgan, Morgan Stanley and Mediobanca of approximately £2.1bn, which includes approximately £1.6 billion (equivalent) of term loans and approximately £500m (equivalent) of bridge loans/senior secured notes. 888 has also obtained a fully committed revolving credit facility of £150m.

 To create a more beneficial long-term capital structure, 888 expects to raise approximately £500 million of gross proceeds by issuing new equity via a capital raise (“Capital Raise”) to be undertaken at an appropriate time, such that pro forma net leverage ratio is under 4x.

888 said that the acquisition is expected to deliver ‘substantial value creation’ for shareholders from pre-tax cost synergies of at least £100m per year, along with potential revenue upside from an enhanced customer proposition and product offerings. It currently expects to cumulatively achieve approximately £10m of such synergies in 2022, £54m in 2023, £69m in 2024, and £100m in 2025, including £15m in capex synergies.

The deal represents some interesting business by US gaming giant Caesars Entertainment, which only bought the William Hill Group in April for £2.9bn. This disposal now means it essentially acquired the William Hill US assets for £700m in a market where valuations are high in anticipation of massive sports betting growth. 

Whether 888 now pulls the same manoeuvre by auctioning off William Hill’s retail estate – the company has 1,400 betting shops around the UK – remains to be seen. 

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