Three-way merger of bookmaker William Hill ‘blindingly obvious’, insists Rank chief

THE boss of Rank Group has claimed its attempted takeover of William Hill with 888 is a “blindingly obvious” deal, as the two suitors indicated they were prepared to lift their £3.2bn bid for Britain’s biggest bookmaker.

Rank, the operator of Grosvenor casinos and Mecca bingo halls, and online gambling company 888 stepped up their pursuit of William Hill by calling on its board to open talks so that they could reach a recommended deal. It came a day after Gareth Davis, the bookie’s chairman, dismissed a 364p-a-share bid by the pair as “highly opportunistic” and fraught with risks for his company’s investors.

To regain the initiative, 888 and Rank yesterday published details of the £100m of annual cost savings they expected to generate by 2020 from a three-way tieup, by merging digital platforms, consolidating offices, and combining marketing spend. A deal would create a FTSE 100 gambling giant that would not only be the UK’s biggest multi-channel operator, but a “transformational force in the global betting and gaming industry”, they argued.

“To us, this combination is blindingly obvious,” said Henry Birch, the chief executive of Rank, in his first comments on the bid, adding that he and his counterpart at 888, Itai Frieberger, “would like to engage with William Hill on a friendly basis”.

The cash-and-stock bid William Hill spurned earlier this week came at a premium of just 16pc to the bookie’s share price before it emerged in July that Rank and 888 were eyeing a deal. Mr Davis dismissed the proposal as “substantially” undervaluing his company.

“The price is something that we can always discuss,” the 888 boss said, although an improved offer was not made yesterday. Neither he nor Mr Birch would comment on whether they were prepared to lift the cash element if they submitted a higher offer to make it more attractive.

Britain’s gambling industry has been transformed in the past year by a series of deals as companies attempt to cope with the higher taxes and stricter regulation that have been imposed on betting and gaming. Last year, Ladbrokes and Coral struck a merger and Betfair and Paddy Power agreed a tie-up. William Hill has been left isolated because it has failed to make a big acquisition, having unsuccessfully tried to buy 888 for £720m in February 2015.

“From November we talked to each other about potentially mapping out how we might participate in consolidation,” said Mr Birch, when asked when discussions began with 888. They started to examine a joint bid

for William Hill in April, a month after the bookie sounded a profit warning.

Since then, William Hill has been plunged into more turmoil. James Henderson, its boss for just two years, was ousted last month by its board because of his failure to revive its struggling online operations. Rank and 888 are proposing that Mr Birch, who previously led William Hill Online, would become chief if the deal goes ahead.

The pair rejected claims that a threeway deal would be too complex. 888’s Israeli founding families own 50.7pc of the company and Malaysian billionaire Quek Leng Chan holds 56.1pc of Rank, and they are supportive of the William Hill bid. That simplifies the deal, the gambling chiefs said.

William Hill has argued the £2.2bn of debt the combined company would be saddled with, to help finance the deal, is too much of a burden, and its chairman last night reiterated his opposition to the plan. But 888 and Rank believe the enlarged business would quickly deleverage and be capable of a dividend with a 40pc payout ratio.

Shares in William Hill fell 4½p to 324½p, indicating a deal is considered unlikely. 888 lost 2¼p to 217p and Rank fell 3.3p to 207.7p.