Caesars, William Hill Sports Betting Spinoff Chatter Gains Steam
The creation of a Caesars-William Hill online sports betting and gaming spinoff might be imminent if two top analysts’ recent musings on the matter prove right.
A joint venture between the Las Vegas casino behemoth and the legacy British bookmaker is believed to be in advanced talks and likely to be announced by the end of the year.
According to a recent note by Roth Capital analyst David Bain, Caesars and William Hill have been in talks over a 50-50 partnership for some time now. A deal of this kind could see Caesars combine its online gaming and sports betting operations with William Hill US.
Casino operators Caesars Entertainment Corp. and Eldorado Resorts completed their $17.3 billion merger (originally announced last summer) in July. And in 2018, Eldorado and William Hill entered into a partnership that saw the British bookmaker become the exclusive sportsbook operator for the casino operator.
As part of Eldorado’s tie-up with Caesars, William Hill will be running all of the enlarged Caesars’ domestic sports betting facilities. The British operator has thus gained access to iconic Las Vegas Strip properties such as Caesars Palace, The LINQ, Paris, and Bally’s.
Spinoff Idea Gaining Momentum
According Roth Capital’s analyst, David Bain, the idea of Caesars combining its online operations with William Hill is gaining momentum for a number of reasons, including the fact that the UK-based bookmaker is running all of Caesars’ sportsbooks around the US, William Hill’s status as “the third-largest player in the fast-growing US online sports wagering market, and the notion that the investment community doesn’t adequately value William Hill’s US business.”
Caesars’ CEO, Tom Reeg, was probably the person who first sparked spinoff speculation. Mr. Reeg previously led Eldorado and stepped in as Chief Executive of the new Caesars this summer.
Shortly after Eldorado announced its bid for Caesars in June 2019, Mr. Reeg said that the idea of a spinoff of Caesars’ online gambling business and William Hill was under consideration because the markets did not really appreciate the two businesses and their combination could unlock greater shareholder value.
It should be noted that Caesars already owns a 20% stake in William Hill US through the latter’s earlier partnership with the former Eldorado.
Deal Likely to Close by End of 2020 or in Q1 of 2021
Of a potential 50-50 partnership between Caesars and William Hill, Deutsche Bank gaming analyst Carlo Santarelli said in a recent research note that they believe “there are numerous options on the table pertaining to this structure and reconciling it with an opportunity that is beneficial for both parties.”
He added that a spinoff involving William Hill should be a priority for Caesars.
Meanwhile, Mr. Bain noted that an interactive partnership spinoff in the public equity markets between Caesars and William Hill is likely to happen by the end of the year and ahead of investor expectations.
He added that spinoff talks are in an “advanced stage”, but even if they stall and market conditions push a transaction to the first quarter of 2021, “it would still be well-ahead of investor expectations and draws a transformational catalyst into sight.”
HG Vora Builds Stake in William Hill
Meanwhile, news emerged earlier this week that US activist hedge fund HG Vora Capital Management has built a 5.1% stake in William Hill for a reported £115 million. The transaction stoked speculation that the investor could push for a sale of the British sports betting operator.
HG Vora previously invested in several gambling companies, each time pushing them to take the M&A route. In 2018, the activist hedge fund bought a 5% stake in Caesars and was one of the company’s investors that pressed it to explore different options, including a sale.
A few years ago, HG Vora took stakes in both Penn National Gaming and Pinnacle Entertainment before their marriage in the fall of 2018.
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