British bookmaker William Hill has rejected a revised takeover bid from 888 and Rank stating that the new offer still undervalues the company substantially.
888 and Rank had their initial approached turned down on August 8, and William Hill went public on August 14 to reject an unsolicited proposal from 888 and Rank. The initial proposal was for a combined cash-plus-shares deal to be struck, at a price of approximately 364p per share in William Hill.
This latest offer is for 199p a share in cash, plus 0.86 percent of a share from the new company that 888 and Rank would merge into before taking over William Hill. While the cash component of the deal remains unchanged from the initial offer, this new proposal would see shareholders in William Hill own 48.8 percent of the new combined group, compared to the 44.6 percent offered in the earlier proposal.
Shares in William Hill fell to 325p a share (2.6 percent) after the statement was released, suggesting investors in the bookmaking giant do not expect a deal to be agreed upon before the August 21 deadline set by the Under Takeover Panel.
Speaking of the new, rejected proposal, William Hill Chairman, Gareth Davies, said: “This revised proposal continues to substantially undervalue the company and the cash element of the proposal has not changed. Therefore, the board sees no merit in engaging. As we have said before, this is highly opportunistic and complex, and does not enhance the strategic positioning of William Hill.”
One of the hurdles the companies face is how they value the deal that is on the table. William Hill claim the offer values the company at £3.1 billion, or 352p a share, while 888 and Rank state its offer is closer to 394p a share, therefore valuing William hill closer to £3.4 billion.
However, 888 and Rank claim to have identified £100 million per annum cost savings from the deal, which would be worth an additional 52p a share to investors in William Hill.
Although both William Hill directors and market analysts believe the takeover is a risky one, due to the fact the new company will be burdened with an extra £2.2 billion of debt, both 888 and Rank have said low interest rates, and the fact the new company would be the United Kingdom’s biggest multi-channel gambling entity, would allow it to reduce any borrowings faster than usual.
Until all three parties are more transparent in their calculations it looks like no further negotiations will take place. It has been suggested in the business sections of several British broadsheet newspapers that an offer of at least 400p a share would be required to begin a full negotiation process.
Lead image courtesy of The Telegraph