Caesars Entertainment Inc. said William Hill Plc’s board would likely recommend its 2.9 billion-pound ($3.7 billion) takeover offer price, giving it an edge over rival suitor Apollo Global Management Inc.
The British gambling group confirmed it received approaches from both U.S. companies after Bloomberg reported Apollo’s interest on Friday. William Hill shares fell 10% to 280.4 pence at 12:44 p.m. in London on Monday — slightly above Caesars’s 272 pence bid — as investors reined in expectations of a hefty counteroffer by the private equity firm. William Hill shares had soared 43% on Friday after the rival takeover approaches emerged.
Caesars’s U.S. joint venture with William Hill “makes rival offers unlikely,” said Goodbody analyst Gavin Kelleher. The bid is a 25% premium to William Hill’s closing share price before the takeover interest was reported.
Caesars also announced a stock offering of 30 million shares on Monday, which could raise about $1.7 billion based on the $57.07 Friday closing value of its stock. Proceeds could be used to pay for the proposed acquisition, the company said.
Caesars controls 20% of the U.S. joint venture and William Hill controls the remaining 80% of the equity. The two were already in discussions 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 maximize the opportunity in the sports betting and gaming sector.” If its bid is successful, Caesars said its focus would be on William Hill’s U.S. assets and it would “seek suitable partners or owners” for the other businesses, such as the U.K.
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 cutting off the British company’s access to the crucial American market.
William Hill’s home market has been hit with regulations such as 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.
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. The 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 on the rival offer.