William Hill is heading to the US. The UK bookmaker’s board has recommended a £2.9bn cash offer from America’s Caesars Entertainment, one of its largest gaming groups; its properties include the famous Caesars Palace hotel and casino in Las Vegas. At 272p a share, this offer represents a premium of 60% to William Hill’s share price before Caesars first approached it in early September and is well over double the 128p at which William Hill raised money from shareholders a few months ago. Caesars is funding the purchase by issuing shares of its own. The deal will be put to William Hill’s shareholders at the company’s next general meeting. 

Caesars isn’t the only company interested in buying William Hill; the other potential suitor is buyout firm Apollo Global Management, which could still launch a counterbid. But it has been “unceremoniously lapped” by the “lightning speed” of talks between Caesars and William Hill, as Ben Marlow puts it in The Daily Telegraph. And Caesars’ “bombshell” announcement that it would end its current US joint venture tie up with William Hill if anyone else bought the UK group also militates against a takeover by Apollo.

The American market is the main prize

Caesars’ threat to end the joint venture if William Hill was bought by anyone else has been pivotal: the “promising” US division of William Hill is the part that “everyone wants”, says Nils Pratley in The Guardian. While the US sports betting market is growing, helped by a gradual loosening of America’s laws around online gambling, the UK market is a “mess” owing to the industry’s “fixation” with fixed-odds betting terminals, which are facing further regulatory crackdowns. Overall, Caesars’ control over the joint venture seems to have made it “impossible” for William Hill to escape its clutches.

Caesars now looks set to “end up with a lot more chips than it is putting down”, says Stephen Wilmot in The Wall Street Journal. This is because enthusiasm about the potential for online gambling in the US is so strong that rival sports-betting firm DraftKings is commanding a valuation “reniscent of the software sector”. If this continues Caesars could make a lot of money by selling off the UK betting shops, building up the US business and then spinning off the online operations as a separate company.

Given the strong prospects for the US market, William Hill’s shareholders could always decide to reject the offer for now, hoping that the revenues from the US operations will further enhance the bookmaker’s value, says Kate Burgess in The Guardian. Some experts think its share of the joint venture is worth at least £3bn, which would mean the overall firm should be worth £1bn more than Caesars is offering. But this is a risky option as its US operations “won’t make a profit for at least three years”, forcing it to “spend many millions on branding”.