How William Hill Failed to Merge with Caesars
It could have been one of the largest gambling industry mergers in the world. In 2018, William Hill and Caesars were in serious talks regarding a merger that would have been worth approximately £6 billion. But those talks ultimately broke down over price, and casino giant Caesars Entertainment walked away in search of a better deal.
However, in a twist of fate and a nod to the small world in which gambling entities operate, William Hill and Caesars are now linked in the Eldorado Resorts deal. We’ll explain.
2018 William Hill and Caesars Negotiations
By all accounts, it was William Hill that initiated the talks with Caesars Entertainment last year. The discussions had become very intense, as both wanted the merger to move forward.
William Hill has long wanted a larger presence in the United States. Especially in the past year since the US Supreme Court overturned PASPA, the Professional and Amateur Sports Protection Act. This had led to the opening of sports betting markets across America, with many states jumping at the chance to legalise sports betting in some form within their state borders. Meanwhile, William Hill has been anxious to find more opportunities in the new sports betting arena.
In addition, William Hill had been struggling a bit in other parts of the world, especially the UK. The UK Gambling Commission has been implementing consumer protection moves, such as reduced betting on FOBTs. Needless to say, William Hill had seen its shares of struggles.
In 2018 alone, William Hill suffered a pre-tax loss of £722 million.
A look at the past year on the London Stock Exchange shows a William Hill stock price of $309.80 in early June 2018. By mid-December, however, it had dropped to $155.20. Its highest point in 2019 was February 28 when it peaked at $187.55, but it dipped severely in May, hitting $132.30 on May 24.
Caesars also had serious troubles in the past few years. This includes recovering from bankruptcy and rebuilding amidst board changes and market regulations. However, its increased revenue in late 2018 and early 2019 made it appealing.
Stock prices on Nasdaq for Caesars Entertainment hit a $6.03 low in mid-December 2018. It began to rebound in early January, though, and has since fluctuated between $8.08 and $9.59 most of the year.
Money Talks or Caesars Walks
The number on the table seemed to be £6 billion (or $7.5 billion). However, the trouble came from negotiations between cash and shares.
Furthermore, since news emerged this week over the failure of the two companies to agree on a price for the deal, both have suffered on the stock market front. Caesars dropped from $9.01 last week to $8.56 on Monday when the news broke. Meanwhile, William Hill dropped from $134.90 to $129.75.
Both have recovered somewhat due to the revelation that the deal is not completely off the table. William Hill and Caesars have a deeper connection.
Caesars and Eldorado Resorts
It was first reported in March 2019 that Caesars had been in talks with Eldorado Resorts. At that time, the merger discussions were in their early stages.
The talks were spurred by Carl Icahn’s new position on the board and his advice to sell the company.
Eldorado had been granted some financial information about Caesars and had been doing its due diligence regarding a merger. However, it was reported – but not confirmed – that Eldorado CEO Tom Reeg wanted Caesars to cut costs by at least $500 million before the talks could continue. That was likely due to Eldorado and its $3.3 billion in debt eyeing Caesars and its $9.1 billion in debt and wondering how the two could merge.
The William Hill connection comes in to play with Eldorado. After all, the two companies agreed to a business deal in September 2018 regarding sports betting technology for Eldorado properties. Part of the deal was for Eldorado to receive an equity stake in William Hill and 20% of its US business.
Technically, if William Hill and Caesars never resume talks, William Hill could still be a part of the Caesars enterprise if Caesars and Eldorado merge. This is due to the latter’s one-fifth ownership of William Hill’s growing US-based business.
Which Deal Will Happen?
Most faith is put into the Eldorado and Caesars deal, as it seems to have the most potential and is the likeliest pairing. The talks have also not broken down as they did with William Hill.
According to Deutsche Bank analyst Carlo Santarelli: “We believe the likelihood for an ERI/CZR pairing has increased, and we believe this transaction would be a net positive for ERI, CZR, and the gaming group more broadly, given the valuation implications and broader halo of a busy (mergers and acquisitions) environment.”