Casino operator Caesars Entertainment confirmed an interest in acquiring sports betting giant William Hill and commenced a stock offering of 30 million shares on Monday, the proceeds of which could be used in the purchase of the British-based company.
Caesars said in a brief statement that it expects to use the net proceeds from the stock sale for general corporate purposes, but suggested that the funds could be included in a cash offer for William Hill. The companies confirmed the merger talks last week.
According to Reuters on Monday, William Hill’s board was inclined to recommend an offer to shareholders from Caesars, which is valued at $3.7 billion. William Hill also said it was considering an offer from Apollo Global Management and has until Oct. 23 to reach an agreement.
Caesars already owns a 20% stake in Las Vegas-based William Hill US, which operates sports betting at the company’s casinos in Nevada and other regional markets. Including its Caesars operations, William Hill US is on pace to operate sports betting in more than 170 retail locations across 13 states.
Jefferies gaming analyst James Wheatcroft, who is based in London, said William Hill US holds a 29% market share of sports betting in the U.S.
“As more US states legalize, more quickly than we expected, the prize is substantial,” Wheatcroft said.
According to a filing with the Securities and Exchange Commission associated with the stock offering, Caesars said it would seek to obtain $2 billion in new debt that would be secured by William Hill’s non-U.S. businesses.
“We believe that the possible William Hill acquisition represents a compelling opportunity to improve the offering and experience for the customer,” Caesars said in the filing, highlighting six bullet points concerning the size and scope of Caesars’ businesses, 60 million customers within Caesars’ loyalty program, and William Hill being afforded “the ability to access our extensive and preexisting relationships with dozens of sports teams and events, including being the exclusive casino partner of the NFL.”
Wheatcroft said William Hill currently does not have access to Caesars’ customer loyalty database or the company’s igaming products, “both key upside opportunities.”
In the SEC filing, Caesars said the company’s focus would remain on U.S. opportunities for sports betting and online gaming. The company said it would “to seek suitable partners or owners” for William Hill’s “presence in the UK and other non-US international markets.”
Caesars said any proceeds from potential sales of non-U.S. businesses would be used to pay down debt.
Roth Capital Partners gaming analyst David Bain suggested in a research note Monday that Caesars could sell the non-U.S. portion of William Hill for roughly $2 billion.
“Should the deal hold, after divestment of non-William Hill USA businesses by Caesars, we believe Caesars will have created roughly $10.4 billion of value, for consideration of roughly $1.7 billion,” Bain said.
The potential deal comes a little more than two months after the $17.3 billion merger between Eldorado Resorts and the former Caesars Entertainment became official. The management of Reno-based Eldorado took control of the operation but retained the Caesars name and stock symbol
Caesars has 55 gaming properties in 16 states. Since completing the merger in July, William Hill has opened 12 branded sportsbooks at Caesars’ properties in Nevada, Iowa, and New Jersey.
Earlier this month, Caesars unveiled its sports betting media partnership with ESPN, which will link the network’s digital platforms with the company’s sports betting operations. Caesars Sportsbook by William Hill will become the exclusive odds provider and co-exclusive sportsbook link-out provider to ESPN. Financial terms were not disclosed.
The underwriters of the Caesars stock sale have a 30-day option to purchase up to an additional 4.5 million shares.
Shares of Caesars, traded on the Nasdaq, closed at $58.21 Monday, up $1.14, or 2%.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
