Shares in 888 jumped over 17 per cent this afternoon after the gambling giant announced that it had sliced the value of its upcoming William Hill acquisition due to the changing “macro-economic and regulatory environment”.
The deal agreed with US powerhouse Caesars Entertainment refers to William Hill’s non-US assets, which now have an enterprise value of between £1.95bn and £2.05bn, as opposed to the £2.2bn that was agreed last September.
The new agreement means 888 will now pay £250m less for an initial cash consideration, down from £835m.
The combination of 888 and William Hill is expected to deliver significant efficiencies, including pre-tax cost synergies of at least £100m.
888 currently expects to cumulatively achieve £5m of synergies in 2022 , £54m in 2023, £70m in 2024, and £100m in 2025.
On a practical level, 888 will also take control of William Hill’s 1400 UK betting shops, as well as online gaming brands Mr Green and Redbet.
However, in order to fork out for the costs, 888 has fully committed debt financing from J.P. Morgan, Morgan Stanley, Mediobanca and Barclays Bank of approximately £2.1bn. The deal is expected to complete in June 2022.
Alongside yesterday’s update, the gambling firm revealed that revenue for the first quarter is currently expected to be in the range of $222-226m (£170-173m), an increase of 0-2 per cent compared to the fourth quarter of 2021.
While revenue is down relative to the first quarter of last year, 888 said that this was a reflection of the ongoing regulatory and compliance changes, including the temporary closure of The Netherlands.
Crucially, 2021 was also a particularly strong comparative period that was impacted by leisure restrictions across several key markets.
However, analysts at Peel Hunt were confident about the company’s transformation plans with the acquisition, as well “management’s ability to realise those benefits” when integrating the two businesses. Brokers reiterated their Buy rating for the stock.
Full first quarter results will be released at the end of this month