William Hill, Britain’s largest bookmaker, has rejected a second bid by 888 Holdings and Rank Group for a three-way merger that was reportedly valued at billion or 3.1 billion pounds.
The two sides, however, announced different valuations for the new bid. William Hill said that the new bid was worth 352 pence a share, while Rank and 888 gave a valuation of 394 pence. The dispute over the valuation is seen as driving the two sides even farther apart.
Essentially, the revised bid would give William Hill investors a greater share of the merged company that would be created from a deal but kept the cash portion of the bid unchanged from 888 and Rank’s initial bid for the company.
William Hill shares fell further below the bid price early last week as analysts became skeptical that a deal will materialize. William Hill has cited both the price of the offer and the risk presented by a potential 2.2 billion pounds of additional debt as reasons for rejecting the “highly complicated” bid.
According to an unnamed source speaking to Bloomberg News, 888 and Rank officials are reportedly debating whether to walk away from the merger or raise their offer further to try to get William Hill to the negotiating table. However, the report said 888 and Rank officials are growing frustrated about William Hill’s refusal to talk amid disagreements over the valuation.
According to a breakdown by Bloomberg, William Hill said the latest cash-and-stock proposal is similar to an initial bid of 339 pence that the bookmaker declined. The valuation is based on share prices as of July 22, the last trading day before the takeover approach was announced, the company said.
Rank and 888 said their latest bid valuation is based on Aug. 5 share prices and their calculation of their own merger. The companies said they increased the stock element of their bid, while leaving the cash portion unchanged at 199 pence a share. William Hill shareholders would own 48.8 percent of the combined company, compared with 44.6 percent under the original terms.
Many analysts, however, feel a successful bid would have to values shares at well over 400 pence, reports said.
The new proposal “moves nothing forward,” William Hill Chairman Gareth Davis said in a statement. “I can’t engage in something based on risk, debt and hope.”
Rank and 888 have said a merger would create a combined group that would be Britain’s largest gaming company. It would also keep pace with betting-industry consolidation in the UK that has included the pending merger of competitors Ladbrokes and Coral, and the combination of Paddy Power and Betfair.
The takeover proposal is backed by both the main shareholders of 888 and Rank, the companies said. Malaysia’s Hong Leong Co. owns 56.1 percent of Rank, while Israel’s Shaked and Ben-Yitzhak families hold 50.7 percent of 888.
