London based hedge fund, Parvus Asset Management, has reignited interest in a possible sale of gambling industry biggie William Hill. In fact, there have been many rumours of mergers and acquisitions swirling around William Hill but nothing has come of it as of now. However, it seems that the privately owned company is now eager to find a buyer for the bookmaker and gambling operator in which it holds a 14.3% share.
It is quite likely that the renewal of interest in offloading the shares has been triggered by the possibility of new government regulations that will cut William Hill’s profitability. The UK government is about to release a triennial report on the nation’s gambling industry, but what is causing concern at Parvus is that the report will have specific focus on the highly contentious vertical of fixed-odds betting terminals. William Hill’s retail business in the UK is highly dependent on these terminals, and therefore any added regulations will hurt its profitability. Mads Eg Gensmann, the Danish owner of Parvus, is clearly eager to divest himself the FTSE 250 company’s shares before this happens.
William Hill has unfortunately been going through a fairly rough patch over the past couple of years. For one, its online division has not been performing according to expectations. The company also got a rude shock when the results of the 2016 Cheltenham Festival didn’t go the way it anticipated and it subsequently had to pay out huge amounts of money to the customers who betted correctly. In fact, this event contributed substantially to lowering the full-year profit from expectations with the company issuing a profit warning earlier this year.
William Hill’s name was linked to that of two possible suitors during 2016 but eventually nothing came out of these. The companies in question, the Rank Group and 888 Holdings, had each of their offers rejected by the UK bookmaker because the price offered was not good enough. William Hill subsequently commenced merger negotiations with Canadian company Amaya but Parvus did not look too kindly upon a potential deal. In fact, a merger could have created a gigantic entity but there were fears that shareholder value could have been compromised. In fact, Parvus went on to say that the Amaya merger discussions that were worth £5 billion did not have any logic or value before having the talks scuttled.
It has become increasingly apparent that Parvus is now open to bids from interested parties, especially if they have a strong online presence. The main contender for William Hill seems to be GVC Holding. Incidentally, this B2B and B2C gaming company had recently expanded its hold over the market thanks to buying out bwin.party. Even more interesting is the fact that 888 Holdings retains its intention to tie up with the bookmaker.
William Hill has a huge presence on the ground with 2,329 betting shops spread out all over the United Kingdom and most of these shops hosting FOBTs. It seems likely that the government will place restrictions on the amount of money that can be staked on these machines. Given that the bookmaker has thousands of these machines in operation, it clearly anticipates a reduction in profitability this year. Another point to be noted is that the company competes against a number of merged entities such as Paddy Power Betfair and Ladbrokes Coral in a market that is already very saturated. William Hill is also on the lookout for a Chief Executive to take the place of James Henderson who left the company last August. Needless to say, Parvus will also have a major say in this decision.