888 primed for £250m windfall as William Hill offer price shrinks on regulatory pressures
Impending gambling act review and William Hill UKGC licence review highlighted as main reasons for reduced value
888 has negotiated a £250m reduction in the £2.2bn it will pay Caesars to acquire William Hill’s non-US assets, the London-listed operator has confirmed.
Releasing a 166-page update document, 888 confirmed a reduction in the cash consideration element from a price of £834.9m to just £584.9m, which is a fall of almost 30%.
The document claims the lower price “reflects the change in the macroeconomic and regulatory environment since the announcement of the acquisition”.
Based on this reduction, the enterprise value of the William Hill now stands at between £1.95bn and £2.05bn, a reduction of up to £250m from the completion price. 888 agreed a £2.2bn deal for William Hill International last September.
This represents an acquisition multiple of approximately 7.5x normalised EBITDA, and 5.7x on a post-synergy basis for the William Hill business for the 12 months ending December 2021.
Under the revised terms, a deferred £100m will be paid to Caesars, based on the adjusted EBITDA of the combined business in 2023, something which will be either settled in cash or via the issuance of new shares in 888.
To fund the acquisition, 888 has committed to a capital raising exercise to issue 19% of its share capital (70,806,504 shares) through a share rights issue on the London Stock Exchange taking place later today, 7 April, via an accelerated bookbuild coordinated by JP Morgan and Morgan Stanley.
Caesars has agreed to indemnify 888’s UK businesses from “certain potential losses and costs” arising from a high-profile review into the William Hill International business by the UK Gambling Commission (UKGC).
In November 2021, William Hill notified the UKGC of issues arising from “challenges implementing cross-brand self-exclusion processes” in its UK portfolio resulting in an ongoing licence review by the UKGC.
It states: “Following a compliance assessment conducted in July and August 2021, the William Hill Group is subject to an ongoing licence review and is addressing certain action points raised by the UKGC in relation to WH’s social responsibility and anti-money laundering obligations.
“It has provided the UKGC with an action plan to address the action points raised by them and is in the process of implementing that action plan.”
Additionally, it was reported that William Hill saw its H2 2021 profit plunge 21% to £277m compared with £352m in H1.
The equity raise is to be funded by the issuance of 70.8 million new ordinary shares in the capital of 888 through an accelerated bookbuild and this would represent 19% of the current share capital of the company.
888 is expecting to complete the acquisition in June 2022, following a May shareholder meeting, having previously hoped to complete in Q1 2022.
888’s share price soared 30% the news of the restructured deal, peaking at 251p. At the time of writing, the FTSE 250 company’s shares were trading at 233p.