Bookmaker William Hill has walked away from another merger after a public row with its top shareholder galvanised investor opposition to the deal.
Last week, the UK's largest high-street betting-shop chain announced it was in talks with Amaya of Canada, the world's largest online poker company, over what it termed a "merger of equals".
A deal would have been executed as a "reverse takeover" by William Hill and based on the share price last Monday, when the talks became public knowledge, was worth around £4.7bn.
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The companies had been in informal discussions for weeks, with bosses, after news of the possible merger leaked, proclaiming a tie-up would create a "clear international leader across online sports betting, poker and casino games".
This morning, however, the process was abruptly halted. A statement from Amaya said its board "concluded that remaining an independent company is in the best interest of… shareholders at this time".
William Hill's chairman Gareth Davis was more candid, saying a public spat with its largest shareholder, hedge fund Parvus, over the weekend had triggered wider unrest and derailed the deal.
"The general feeling was a lack of appetite to pursue the discussion," he told the Financial Times. "A lot of it is down to a lack of contemporary knowledge of Amaya. I don’t think they have been great at communicating about their business."
Issues such as insider dealing allegations hanging over Amaya's ex-chief executive and a clampdown on online poker in the US were potentially a factor, some analysts said.
Amaya, whose share price has slumped 30 per cent in the past year, will now have to resolve those problems alone.
William Hill has its own challenges. Revenue and profit growth has been slow and it risks being left behind in a rapidly consolidating industry, having missed out on three deals since late last year. It is also still without a permanent chief executive.
Former boss Ralph Topping said the board has been "routed" and warned of "opportunistic" rivals launching hostile bids in the future.
"There is crimson in the water," he added.
William Hill in talks over £4.7bn 'merger of equals'
10 October
British gambling company William Hill is the subject of takeover rumours again, this time in the shape of a £4.7bn "merger of equals" with the Canadian online gambling giant Amaya.
Tie-up talks were confirmed in a joint statement on Friday, reports Reuters. It stated an all-share merger would be "consistent with the strategic objectives" of both companies.
Amaya has been an acquisition target since at least February and the BBC says private equity firms are still circling the owner of the PokerStars and Full Tilt Poker brands.
William Hill has been linked to prospective consolidation deals since last year. In August it twice rejected an audacious three-way merger bid put forward by its online rival 888 and the casinos business Rank.
At the end of what became an ill-tempered exchange, William Hill bosses branded the offer "opportunistic" and even claimed the bidders' price tag was not £3.4bn as stated, but around £3bn.
The Daily Telegraph says that by the time the offer was received talks with Amaya were already underway.
William Hill's shares rose 2.8 per cent this afternoon, giving the company a market capitalisation of £2.6bn. Amaya's stock surged nine per cent on Friday, giving it a value of around CAD$3.4bn (£2.1bn).
The British bookmaker is more favourably disposed towards the new bid as it will "create a clear international leader across online sports betting, poker and casino".
The BBC said a merger of the two businesses could create annual cost savings of around £100m.
William Hill takeover falls at first hurdle
19 August
A complex three-way merger that would have created the largest gambling group in the UK will not go ahead after failing to even make it to the start line.
Casinos operator Rank and online giant 888 submitted two bids in an audacious takeover offer for William Hill, which, until the tie-up of Ladbrokes and Coral is completed, remains the UK's largest single bookmaker.
After both bids were rejected out of hand amid squabbling over what they were worth, the duo abandoned the proposal without even engaging in substantive talks.
888 says it has been unable to have "meaningful discussions" and that an offer will not be forthcoming. Its chief executive, Itai Frieberger, told the BBC he was "disappointed" William Hill "did not share our vision".
The two would-be suitors believed they could generate £100m worth of synergies each year by creating Britain's "largest multi-channel gambling operator".
But William Hill was unimpressed by the amount of debt being used in the deal and the cash-and-shares valuation, saying that based on share prices before any deal rumours started, it was worth less than claimed - and too little to be a viable prospect.
A spokesman said today the company has a "clear plan to grow by diversifying digitally and internationally", says The Guardian, and that it expects full-year sales to be higher than its previous forecast of £260m, peaking instead at £280m.
A buyout deal is not yet out of the question, claims the London Evening Standard, citing "chatter that other interested parties could have William Hill in their sights".
Analysts at investment bank Liberum say William Hill a target because of its "depressed share price" - despite a rise of four per cent to 315p today, the stock is down by more than 20 per cent since February.
A less complex bid, even from either 888 or Rank, might have more chance of success, they add.
William Hill rejects revised takeover offer
16 August
William Hill has rejected a revised takeover offer from rivals Rank and 888, saying it remains "highly opportunistic" and still "substantially" undervalues the business.
Britain's largest bookmaker revealed on Sunday that its two suitors had returned with a higher bid than the £3.2bn it rebuffed last week.
But had they?
In its statement, William Hill picked apart the maths behind the audacious three-way merger proposal and said it now believes even the higher second offer is worth just £3.1bn.
Casinos operator Rank and online gambling giant 888 are proposing to merge their own businesses and then use shares in the combined entity, alongside a cash component, to buy William Hill.
The original offer was valued at 364p based on the share prices on all three firms on 5 August, the day before the first formal offer was made, reports the Daily Telegraph. Rank and 888 believe Sunday's revised offer was worth 394p.
Analysts say a bid might need to get to 400p, valuing William Hill at around £3.5bn, to be successful.
But the bookies, using the reference point for share values of 22 July, the day before rumours first emerged that a takeover offer might be forthcoming, says the two bids are worth 339p and 352p respectively.
A source close to Rank and 888 branded the revaluation as "a brazen attempt to move the goal posts" designed to push their two rejected offers away from the key 400p-a-share level.
Investors clearly believe the spat makes the possibility of a successful deal much less likely. William Hill's shares fell 6.4 per cent to 312p yesterday and were down another 2.5 per cent this afternoon to 305.6p.
William Hill centre of £4.6bn three-way merger plot
25 July
William Hill is the subject of an audacious three-way merger bid being plotted by rivals 888 and Rank that would create a £4.6bn gambling goliath.
The boards of both 888 Holdings and Rank, respectively one of the sector's biggest online operators and the UK's single largest casino and bingo-hall owner, confirmed to the BBC they have made an approach to the UK's second-largest high-street betting shop estate.
The two companies said they see "significant industrial logic in the combination", but that there was "no certainty that any transaction will ultimately take place".
For its part, William Hill said it would "listen to and consider" any proposal. But the firm added it was not clear that a combination with 888 and Rank would "deliver superior value to William Hill's strategy".
William Hill's share price has since bounced more than six per cent to 332.6p today, valuing it at £2.9bn. Share price rises of four per cent and 0.4 per cent have also been recorded by 888 and Rank, which are collectively valued at more than £1.7bn.
William Hill had been the largest betting shop operator in the country until the agreed merger of Ladbrokes and Gala Coral earlier this year.
That was itself the latest in a wave of consolidation in the sector, which has also seen Bwin agree to be taken over by the owner of Sportingbet and online giants Paddy Power and Betfair strike a near £6bn tie-up.
William Hill has been under pressure, in particular as a result of its failure to break through in the fast-growing online arena. In May, it reported that online revenues at fallen 11 per cent over the preceding 17 weeks.
Chief executive James Henderson was last week ousted after less than two years in the role following a series of profit warnings.
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