Nick Goodway: William Hill must sit tight as suitors jockey for position

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There is impeccable logic in the “clicks, chips and tips” proposal to bring 888 (online gambling), Rank (casinos) and William Hill (bookies) together in a £5 billion deal. 

But there are also some massive fences to be jumped to get to the finishing post.

The industrial case is clear. William Hill has been left behind as its biggest rivals — Betfair and Paddy Power and Ladbrokes and Gala — have agreed mergers.

It is lagging seriously behind in what is increasingly an online and mobiles industry. But putting together two smaller companies to bid jointly for one much larger one is not going to be an easy task. 

Interestingly, the driving force for the deal appears to be investment bank Morgan Stanley. Its name alone appears on the statement issued by 888 and Rank. In the past 888 has been advised by Investec and Stifel, Nicolaus & Co on deals. But only last week Investec changed horse to GVC. Rank is normally advised by Peel Hunt and on previous bid activity by Goldman Sachs and Evercore.

Morgan Stanley is a leader in the leisure industry and Laurence Hopkins, heading the team, is a big hitter in the M&A world. 

Rank and 888 have a dominant shareholder, in Rank’s case Guoco of Malaysia, in 888’s the Israeli brothers Avi and Aaron Shaked. Bringing together such forces and egos and convincing them that becoming minority shareholders in a much larger company rather than a majority shareholder in their own companies will not be easy. 

Then there is William Hill. Naturally it makes the case for independence today and is no doubt describing the bid as opportunistic. But then all bids should be opportunistic. Why else make an offer?

The best bet is for the board under veteran dealmaker Gareth Davies to sit tight and squeeze the best price it can out of the consortium or even a white knight.

Goldman fireproof

The thing about a circular firing squad, which is how MPs described the behaviour of advisers appearing before them in the great BHS manhunt, is that no one is left alive after the shots have been discharged.

However, this will not be the outcome in this case. 

Goldman Sachs is heavily criticised in the Parliamentary report for adding  “lustre to an otherwise questionable process” to which it acted, unpaid, as “gatekeeper”. It had “authority without accountability”.

Sadly, to many of the investment bank’s clients this will actually be an endorsement of its skills not a criticism of its practices. 

After all no one could say Cazenove’s involvement in the Guinness scandal did it any long-term damage.

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July 25, 2016 |
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