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Caesars Lowers Cost of William Hill's Non-US Assets by $300m+
By Jeff Osienya Apr 09, 2022 Industry888 Holdings to spend about $330 million less to purchase William Hill’s international assets outside the US from Caesars Entertainment. Meanwhile, the regulatory review for William Hill UK has led to additional indemnity agreements in the buyout.On Thursday, April 7th, Caesars Entertainment announced that it had revised its agreement with 888 Holdings Plc over the sale of its William Hill non-US assets. The UK gambling titan, 888 Holdings, is now set to pay about $327 million (£250 million) less than the original amount previously agreed by Caesars for the acquisition of non-US assets of William Hill.
Caesars and 888 Inked the William Hill Buyout Deal in Late 2021
The Caesars-888 arrangement over William Hill’s assets outside the United States can be traced back to September last year. It was part of a divestment strategy that Caesars had revealed after acquiring William Hill for about $3.7 billion (£2.9 billion). From the onset, Caesars’ primary focus was on the expansion of its reach in the US gaming market. As a result, this meant that the company had no interest in William Hill’s non-US business operations.
Therefore, it was obvious that the more than 1,500 betting shops owned by William Hill in the United Kingdom would be up for sale sooner rather than later. William Hill, on its part, had been continuously facing a harsher environment for its retail business in the UK. While the Coronavirus had dealt a huge blow to the company when it permanently closed more than 100 betting shops in mid-2020, its woes had started much earlier. Before the pandemic, William Hill had closed down over 700 of its UK kiosks in 2019 due to new regulations that limited the maximum stake on lucrative gaming machines.
Caesar’s lack of enthusiasm for its non-US assets was unsurprisingly great news for some industry stakeholders, particularly in the UK, as it was an expansion opportunity. This set off a bidding war for the assets involving Apollo Capital Management, BoyleSports, Tipico, CVC partners, and 888 Holdings – which finally emerged victorious.
Key Details in the Revised Sale Agreement
Caesars did indeed make good on its intention to let go of William Hill’s non-US assets. However, the terms of the initial deal with 888 Holdings have now changed. As such, the enterprise value of William Hill’s non-US assets has been brought down from the initial $2.87 billion (£2.2 billion) to a figure between $2.55 billion (£1.95 billion) and $2.68 billion (£2.05 billion).
Justifying the revision of terms in the transaction, 888 Holdings has now released an acquisition update. The statement indicates that the transaction terms were revised to reflect the macro-economic and regulatory environment changes since the announcement of the initial deal in September last year. A section of the company’s statement says:
Quote“The board of directors of 888 continues to believe that the acquisition represents a transformational opportunity for 888 to significantly increase its scale, further diversify and strengthen its product mix and build leading positions across several of its key market. The board continues to believe the acquisition has highly compelling strategic and financial benefits, with the current macro-economic environment and changing market conditions across its key markets only serving to strengthen the rationale for bringing together two highly complementary businesses and combining two of the industry’s leading brands.”
888 Holdings has also disclosed an arrangement to pay up to roughly $130 million (£100 million) in delayed consideration in 2024. However, this amount will be paid on the condition that the enlarged group will achieve a minimum Adjusted EBITDA level for the year ending December 31st, 2023. 888 is allowed to pay up all or any percentage of this consideration by issuing new shares or in cash.
Caesars, which is represented by Deutsche bank and Linklaters LLP in this deal, expects to gain $785 million (£585 million) in net proceeds from the sale. This is about 30% or $327 million (£250 million) less than the previously agreed cash consideration proceeds of $1.112 billion (£834.9 million). The proceeds will be collected after deductions of all debt repayments and working capital adjustments. According to the latest announcement from the company, the deal is expected to close in June 2022, subject to 888 shareholder say-so and regulatory approvals.
Following the closure of William Hill’s buyout last year, Caesars moved full-steam ahead with a complete rebrand of William Hill’s online and brick-and-mortar sportsbooks in the US to reflect the change in operations.
William Hill’s UK Woes Continue
Besides the market dynamics, things have not been so smooth on the regulatory front of William Hill UK either. As we speak, the UK Gambling Commission launched a review of the company operations after it was found guilty of not being meticulous enough in adhering to anti-money laundering policies following a compliance assessment conducted in mid-2021. As a result, the review has caused quite the impact on the anticipated deal with Caesars Entertainment.
William Hill has set aside $20 Million to pay a fine to the United Kingdom Gambling Commission should a penalty be imposed. Moreover, if the fine is to be charged, 888 Holdings and Caesars Entertainment have had to revise the deal to include several indemnity agreements. For instance, if the review results in the suspension of William Hill or any of its subsidiaries, Caesars Entertainment will compensate the suspension. Part of 888’s statement on the matter reads:
Quote“… the William Hill Group is subject to an ongoing license review and is addressing certain action points raised by the UKGC in relation to WH’s social responsibility and anti-money laundering obligations. It has provided the UKGC with an action plan to address the action points raised by them and is in the process of implementing that action plan. WH intends to provide in its financial statements for WH FY 2021 to cover expected potential cash outflows resulting from any regulatory sanctions and associated costs resulting from this compliance assessment and license review, noting that the UKGC has a wide range of enforcement powers at its disposal, including the power to request remedial actions, impose fines and suspend licenses.”
To some extent, this will be a sigh of relief for 888 as it is dealing with similar issues of its own. The UKGC imposed a fine of $12.6 Million on 888 Sports after the operator was found to also not take certain precautionary measures regarding money laundering in their operations in the UK.
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