Risky Business, 888’s Acquisition of William Hill International May Be a Bond Too Far

With the ongoing Russian invasion of Ukraine fuelling economic uncertainty and raging inflation, maybe now is not the time for 888’s debt-financed acquisition of William Hill International.

As such, it can be convincingly argued that 888 Holdings’ purchase of the non-US assets of Britain’s storied William Hill gambling house from Caesars Entertainment, Inc. for £1.95 billion (US$2.32bn/€2.26bn) is the right move at the wrong time.

And, given the anticipated negative financial impact of the impending reform of the UK’s 2005 Gambling Act; it’s risky business, a fiscal gamble of double jeopardy.

Back in the pre-Ukraine war, post-pandemic bliss of an all-too-short recovery, buying the unwanted core of William Hill from Caesars appeared to be good business — even though the company’s UK operating licence was under scrutiny.

Caesars, who had stripped what they wanted (WH’s US assets and iGaming expertise), were even happy to offer 888 a sweetener of some £250 million (US$298m/€290.7m) off their original asking price.

For 888 and its ambitious CEO and Chair Itai Pazner it seemed a golden opportunity to forge one of the biggest gambling companies in the world.

But—and it’s since proved to be a very big ‘but’, indeed—888 needed to raise a £1 billion debt bond (US$1.19bn/€1.16bn) to get the deal over the line.

“I am delighted to announce the completion of our transformational combination with William Hill,” Pazner announced in a company statement after the acquisition was completed at the start of this month.

“As I look at the future, the combination of our product and content leadership, powered by our proprietary technology, and our world class brands, gives us a powerful platform for growth.

“This combination brings together two high quality businesses to create a powerful, global betting and gaming business.

“We believe the acquisition will create significant value for shareholders, creating a combined business with leading technology, products and brands across sports betting and gaming.

“With a top quality management team, formed from talent from across both businesses, I am confident about our future plans,” said Pazner.

Meantime, amid the volatility of global markets, investment bankers JP Morgan and Morgan Stanley, who underwrote 888’s billion-pound debt bond, are struggling to spread the risk – despite offering a yield of 10 per cent.

High-level financial sources report that the two investment banks have had to shoulder some £760 million (US$905.3m/€883.9m) of the ticket because few people, or other institutions, want a piece of the action.

Across markets, rising inflation has bled the confidence of investors in debt transactions, and Europe’s high-yield bond indices have dropped some 15 per cent since Russian tanks and artillery began pounding Ukraine.

And all the while publication of the UK government’s pesky White Paper on long-awaited gambling industry reform looms.

Needless to say Pazner and Harinder Gill, 888’s new Chief Risk Officer, will have their work cut out.

888’s interim results, scheduled for early next month, August, should make interesting reading – whatever claims of “synergies of acquisition” are made.

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