Caesars Says $3.7 Billion Bid High Enough for William Hill

Caesars Entertainment Inc. saidWilliam Hill Plc’s board would likely recommend its 2.9 billion-pound ($3.7 billion) takeover offer price, putting it on the front foot in a potential bidding war withApollo Global Management Inc.

The British gambling company confirmed it received approaches from both U.S. companies afterBloomberg reported Apollo’s interest on Friday. Caesars’ bid is 57.6% above William Hill’s closing price on Sept. 1, the day before its first approach.

Caesars’ power over an existing joint venture with William Hill “makes rival offers unlikely,” said Goodbody analyst Gavin Kelleher. Some people may see Caesars’ offer price of 272 pence per share “as a somewhat disappointing outcome,” he added.

William Hill shares fell 13% to 272.2 pence in early trading in London after soaring 43% on Friday.

Caesars and William Hill have a U.S. joint venture with 20% and 80% equity ownership respectively. The two were already indiscussions about merging some of their operations in the U.S., where the British bookmaker is looking to expand following the legalization of sports betting by the Supreme Court in 2018.

Caesars said the joint venture “needs to be broadened in scope in order to fully maximise the opportunity in the sports betting and gaming sector.”

However, it warned it could pull out of some of the partnerships with William Hill if it loses the battle with Apollo. That would risk blocking the British company’s access to the crucial American market.

William Hill’s home market of the U.K. has been hit with regulations like stake limits on betting machines — a rule which rendered hundreds of its stores unprofitable and led to 700 being closed. Further tightening of U.K. gambling rules is being considered, while William Hill’s recent earnings have also been hit by Covid-19 shutdowns of sports events and the remaining stores.

Its market value has been eclipsed by European peers also shifting aggressively toward the U.S. and online gambling.

Hedge fundHG Vora Capital Management LLC owns around 8% of William Hill, having recently increased its holding, a person with knowledge of the mattersaid Friday.

Apollo made its initial written proposal for William Hill on Aug. 27, then both the buyout firm and Caesars made further approaches, William Hill said in Friday’s statement. Both suitors have until Oct. 23 to announce they intend to make a firm offer or walk away under U.K. takeover rules.

Apollo declined to comment.

The firm has a history of investments in the gambling sector. It teamed up with TPG for a 2008 leveraged buyout of Harrah’s Entertainment Inc., which was later renamed Caesars. Last year, it also acquired a stake in Italy’s Gamenet Group SpA.

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