BUSINESS

Hills Succeed where Ladbrokes Failed

TAGs: andrew lee, Gaming VC, Global Betting & Gaming Consultants, Ladbrokes, Lorien Pilling, Mark Blandford, merger and acquisition, Mike O’Donnell, Richard Glynn, Sportingbet, William Hill

After having initially confirmed that a bid was being formed on September 19, William Hill and GVC Holdings now look more than likely to land the object of their desire.

Hills Succeed where Ladbrokes FailedNegotiations with Sportingbet over the joint-acquisition of the online bookmaker were ongoing for just under a month until the board announced that they would recommend the bid to their shareholders. The deal values the company at around £530 million with shares going for 61.1p each, considerably more than the 52.5p per share that was offered just two weeks previously. At the time of the initial bid, the difference between the two parties valuations of Sportingbet seemed stark and threatened to be a hurdle that was insurmountable.

On October 1 a statement was made by the Sportingbet board which explained that the bid “significantly undervalues the business and its future prospects”.

At this stage it appeared that this bid was to follow in the footsteps of Ladbrokes’ failed takeover that fell apart last year. In that instance, it was Sportingbet’s operations in grey markets that caused Richard Glynn to pull out despite the company founded by Mark Blandford attempting to sell off their Turkish operations.

At the time, Glynn said of the collapsed deal: “The potential benefits and risks associated with Sportingbet were clear to us from the outset and have been well covered by the market. We have been unable to agree a structure which delivers increased shareholder value within an acceptable regulatory environment”.

What this really means is that Ladbrokes were all two aware that while Sportingbet’s operations in Australia and Spain could be a big boost for them, their Turkish operations made sure that the juice was not worth the squeeze. But where Ladbrokes found problems, William Hill found answers in the form of GVC Holdings. The operator of CasinoClub and Betboo agreed to take on the Turkish aspects of the business. Their experience in the German and Latin American markets meant that they were much more prepared to operate in Turkey.

Earlier this month Lorien Pilling, director at Global Betting and Gaming Consultants, commented on the deal by saying that while it was a good move, a joint acquisition is not without its issues. He said: “The idea of GVC taking the unregulated business and William Hill the regulated bits makes sense. This appeared to be the stumbling block when Ladbrokes was interested, so it is a solution to that problem. “But as in any negotiation, the more parties involved, the more complicated it becomes to accomodate everyone’s wishes.”

What’s All the Fuss About?

In the shape of Ladbrokes and William Hill, Sportingbet have been approached by two of the biggest iGaming operators out there. For a company that recently reported a £39.1 million loss in the past year, it’s quite something to be attracting such big hitters. In the full year results that were released earlier this month, Sportingbet’s CEO helped us to give us an idea of what exactly William Hill are so attracted to.

He said: “Sportingbet is a very different business to that of a year ago and is in a much stronger position. “Our successful acquisition of Centrebet, which has out-performed our expectations, disposal of Turkey and introduction of regulation in our other key countries has resulted in over 80 percent of the group’s revenues now being derived from regulated and/or taxed countries. “While the economic outlook remains challenging, our robust position across a variety of attractive territories gives us confidence in the outlook for the current financial year.”

It’s this last point that is most likely to have spurred Hills’ interest. The ability to reach markets that Hills had previously not been able to is a massive bonus as the UK becomes reaches its critical mass in terms of iGaming operators. Australia is clearly a huge draw for any operator and Sportingbet are fairly established in this market. Their expertise is also crucial as GBGC’s Pilling explains.

“Given the impact that sudden changes in regulation can have on iGaming, knowledge of the regulatory picture as well as operational issues is important to be able to value a company and its potential risks,” he says.

Another of Sportingbet’s major markets is Spain where Ladbrokes’ flourishing LBapuestas means that they wouldn’t have been quite so desperate to get a foothold here. It could also be argued that if Ladbrokes’ Nevada licence were to be accepted then that would be far more beneficial than the acquisition of Sportingbet. Although Hills aren’t exactly slacking either when it comes to the US either having bought three Nevada businesses earlier this year.

Snapshot

But however you dress it up and make excuses, Richard Glynn’s outfit did make a considerable attempt to capture Sportingbet before anyone else did – an attempt that ultimately failed. This is made even worse by the fact that it’s by no means the first online acquisition that Glynn hasn’t been able to take past the finish line.

Their failure to capture 888 is also a blow that sure to still be a little tender. In stark contrast, Hills have been a bit more savvy in the internet world having picked their partners carefully – despite perhaps caring a bit too much about the bottom line. Their joint venture with Playtech has been profitable but certainly hasn’t been without its difficulties. The sacking of seven bosses in October last year and fallout with Playtech mean that Henry Birch was quickly installed as CEO of William Hill Online.

With Henry Birch soon to depart, his replacement, Andrew Lee, has been heavily involved up until now and is likely to carry on in much the same vein. A buyout of Playtech is likely to be high up on the agenda which together with Sportingbet would create a formidable online offering.

Despite the hiccups involved in WHO, the example of Sportingbet provides an ideal example of just how William Hill and Ladbrokes are faring online. While one has rolled with the punches and got things done, the other has deliberated and ultimately failed to stamp their authority online.

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