William Hill and its Canadian suitor Amaya have ended talks over a potential £4.6bn (CAD$7.2bn) merger following opposition from some of the UK bookmakers’ major shareholders.
Earlier this month, the companies said they were pursuing a “merger of equals”, but on Tuesday William Hill said it was walking away from a potential deal.
“After canvassing views from a number of William Hill’s major shareholders, the board has decided that it will not pursue discussions with Amaya,” the bookmaker said. “Accordingly, the board has informed Amaya that it is withdrawing from discussions and wishes Amaya well for the future.”
Hedge fund Parvus Asset Management, William Hill’s biggest shareholder with a 14.3% stake, published an open letter criticising the deal when news of a potential tie-up first emerged.
Parvus said a deal with Amaya, the company behind PokerStars, the world’s largest online poker business, had “limited strategic logic and would destroy shareholder value”.
It called on William Hill to consider putting the whole business up for sale instead.
Its opposition won support from William Hill’s former chief executive Ralph Topping, who said he had been left “scratching his head” at the proposed merger.
John Colley, a takeover expert and professor at Warwick Business School, said: “It is difficult to see how a merger between UK betting shops and north American online poker could have created benefits.
“The proposed £100m savings looked aspirational at best. Based on revenue-related benefits from cross-selling, shareholders were dubious of the reality of these benefits.”
William Hill said it would continue to focus on the four strategic priorities of online, technology, efficiencies and international, as set out by the company’s interim chief executive, Philip Bowcock.
However, the company said it would “continue to consider strategic alternatives where they have the potential to create shareholder value”. William Hill rejected advances from casino operator Rank and online gambling company 888 in August.
It said trading was positive in the second half of the year and the board expects operating profit in 2016 to be at the top end of the range between £260m and £280m.
In a separate statement on Tuesday, Divyesh Gadhia, the chairman of Amaya, said: “Together with our financial advisers, we evaluated a wide range of strategic alternatives to maximise shareholder value and have concluded that remaining an independent company is in the best interest of Amaya’s shareholders at this time.”
Both Amaya and William Hill have been seeking a deal that can transform their businesses, as they wrestle with a period of consolidation in the sector that has spawned larger and more powerful competitors.
Ladbrokes and Gala Coral are expected to complete their £2.3bn merger within days, after selling 359 shops to Betfred and Stan James to satisfy anti-monopoly regulator the Competition and Markets Authority.
Paddy Power and Betfair teamed up in March, while GVC Holdings bought Bwin.party last year.
William Hill and Amaya had hoped to convince shareholders of the wisdom of their own merger by pointing to the potential to shunt customers between the two businesses to maximise revenue.
A combination also appeared to offer a way out of the firms’ respective woes.
William Hill has been left reeling from a string of profit warnings that saw chief executive James Henderson ousted in July.
Amaya, headquartered in Montreal, Canada, is facing the prospect of an $870m (£707m) fine from the state of Kentucky and an insider-trading investigation into its former chief executive.
But the level of scepticism in the City about the logic of the proposed deal was evidenced by a rise in William Hill’s share price on news that it was off.
Shares in the bookmaker were up nearly 2% against a FTSE100 that gained a more modest 0.76%.
Source: The Guardian
