It's eat or be eaten in the gaming sector, and 888 and Rank have decided they would rather be predators than prey. Once takeover targets themselves, the two gambling firms have joined forces to consider bidding for William Hill, which is down on its luck.
They have pounced with a preliminary approach following last week’s shock exit of William Hill chief executive James Henderson, and a series of profit warnings by the betting firm. The tie-up between Rank and online bookmaker 888 is being driven by a desire to gain greater scale to help absorb the costs from tougher regulation and higher taxes.
These forces have triggered a £5bn merger between Betfair and Paddy Power, plus the £2.3bn combination of Ladbrokes and Coral. William Hill, which once led the internet market for horse racing and football betting, has fallen behind its rivals in a market where online companies are increasingly dominant. This has made it vulnerable to takeover.
A full three-way merger would bring together William Hill’s sportsbook and betting shops, 888’s superior online technology and marketing, and Rank’s physical and virtual casino and Mecca bingo business. William Hill’s shareholders have a choice between continuing to develop the company’s own online operations or turning over its high street shops to the already well-established online presence of 888 and Rank.
As an outlying option, they could hold out for a white knight. The Takeover Panel has given Rank and 888 until 21 August to come up with a formal bid or walk away. Price will be key to success. Broker Cenkos said a successful bid for William Hill would have to be pitched “well over 400p”.
Its share price closed yesterday at 342.4p, up nine per cent on the day. The potential bidders should know what they are getting into: Rank’s boss Henry Birch used to run William Hill’s online division, and 888 rejected a £700m approach from William Hill last year.
News of their interest shows just how quickly the tables can turn in the fast moving gambling space. And the betting is that William Hill’s days as a standalone operator are numbered.