Betfred owners acquire 3% stake in “massively undervalued” William Hill
Taking advantage of undervalued stock or sowing the seeds for a corporate takeover? City analysts have their say
Betfred owner Fred Done has surprised the market by buying a 3% stake in rival UK bookmaker William Hill.
In a deal confirmed yesterday, the Done Brothers (Cash Betting) Limited holding company bought 26,458,375 shares in William Hill, equating to a 3.03% stake in the London-listed operator.
The purchase prompted some to speculate that Betfred might launch a consolidation bid for William Hill, however Done refused to comment on the rumours.
In an interview with Racing Post, Done said: “I’ve bought Hills shares because they are massively undervalued and, in my opinion, when it comes to the US they are front-runners.”
Regulus Partners analyst Paul Leyland claimed that while the purchase of shares was not enough to launch an immediate takeover bid, further share purchases could be on the cards.
“It is possible that Done simply sees value in William Hill’s US positioning, but UK betting is also potentially highly attractive at WH’s marked down price and the fact that the shareholder is Betfred’s main LBO subco suggests buying for corporate reasons.
“Companies can buy up to 30% before making a formal bid and it makes sense to do so when prices are both low and volatile,” Leyland added.
Intriguing move by Betfred as the racing world gathers in Cheltenham: Done Brothers (Cash Betting) Limited has taken a 3% stake in William Hill. Wonder what they're up to. Taking advantage of depressed share price or…..
— Dominic Walsh (@walshdominic) March 9, 2020
Bixteth Partners’ Simon French said: “I think Fred’s most likely taking advantage of market weakness and will also help highlight value in his own business.”
William Hill’s share price rose by 3.71% in early trading today on the London Stock Exchange.
Julian Buhagiar, the co-founder of RB Capital, believes the purchase of such a small amount of Hills’ stock at a lower price was a “smart move” by the Warrington-based bookie.
“It allows a prospective buyer to gradually test market sentiment (on reaction to acquisition rumours) while also allowing for small incremental additional purchases down the line.
“It’s important to note that the end game night not necessarily be a majority stake. Quite a lot of influence – from a decision-making perspective – can be exerted from a minority standpoint, sometimes as low as 5%.
“It’s a popular mechanism employed by activist hedge funds, and I suspect that Fred is quite literally hedging his bets to gauge market reaction before committing the next move,” Buhagiar added.
Elsewhere, William Hill confirmed the award of 800,000 shares in the business to Hills CEO Ulrik Bengtsson under the group’s performance share plan.