The hot topic in the betting industry is whether William Hill will manage to deliver value at a time when most of its competitors merge or seek deals with rivals.
William Hill itself approached 888 Holdings in the first quarter, but wasn’t lucky enough to secure support from the target’s board.
Options are now thin on the ground, and the most reasonable strategy would be a leveraged buyout.
One problem is that William Hill’s balance sheet already carries debt — not much of it, but probably enough to render it an unappealing buyout target. Meanwhile, its size is another issue.
With a market cap of more than £3bn, at least three private equity firms would be needed to orchestrate a take-private deal. This scenario brings huge risks in terms of execution, so even then, it could be an uphill struggle for management.
Its stock price has plunged 10% in the last month of trading.
Online Investment: What’s Going On?
William Hill needs online growth to shore up its valuation, which is a tad rich based on a p/e of 17x for 2015. That is supported by likely flat margins and uninspiring growth rates for sales and core cash flows over the next couple of years.
“We are making excellent progress across our three strategic priorities, particularly in technology where Project Trafalgar will give us the ability to bring our customers a faster and more stable online service, a much improved mobile experience and an enhanced in-play product range on mobile devices,” the company said when it reported its half-year results on 7 August.
Mobile experience is fine, but speed is an issue, our SEO audit indicates.
Here are other key elements that emerged in early August:
- There’s $25m investment in the emerging online lotteries market to support international diversification.
- It recorded a 16% growth rate in online’s UK revenue, while securing key football TV contracts for 2015/16 and Euro 2016.
- It acquired 29.4% of NeoGames, an online lottery software and service provider, for a cash consideration of $25m. There’s a call option to acquire the reminder.
- To bring the online’s extensive product range to retail customers, the group is also developing a proprietary William Hill self-service betting terminal, which it aims to roll out in 2016.
Its online platform clearly needs additional investment, according to our SEO analysis.
What is wrong with it?
Check out our full coverage here!
If you want to get hold of our additional premium research, which discusses how to achieve higher tangible returns at williamhill.com, please email us at info@hedgingbeta.com.
(Alessandro Pasetti and Hedging Beta are not invested in any of the companies mentioned in this story.)