Caesar’s Looks to Buy William Hill

Caesar’s Entertainment has confirmed that the company put a $3.7 billion bid to acquire William Hill. Pretty big offer there, Ceasar’s. On Friday, William Hill also confirmed that they were receiving competitive offers on a buy-out from Apollo Global Management, an investment firm operating out of New York.

Caesar’s is looking to perform a cash takeover of William Hill and might be able to outbid AGM for it. William Hill operates all of Caesar’s sports betting operations, so the business relationship is already there.

The partnership does get a little sticky depending on how William Hill decides to go. William Hill benefits hugely with Caesar’s as their sports betting partner. However, if they go with Apollo, then the U.S. sports betting landscape for William Hill.

Caesar’s vs. Apollo

Apollo Global Management has historically been a buy-out firm under CEO Leon Black. Apollo has yet to comment on Caesar’s counteroffer, but it will be interesting to see how Apollo counters if they even do.

Given the circumstances, if Apollo wins the bidding war, then it will most likely terminate Caesar’s partnership with William Hill as their sports betting operator.

“While a termination of the relationship with William Hill under new ownership makes little business sense, it does add risk for a private equity acquisition…a price at the upper end of our range is unlikely,” Stifel analyst Bridie Barrett said.

Apollo could outbid Caesar’s, which would help William Hill in the short-term. However, the long-term implications could be back-breaking. William Hill has seen their market share grow significantly since they partnered with Caesar’s.

AGM could have the money to place a high enough bid, but how that helps William Hill in the long-term is to be determined.

William Should Chose Wisely

The William Hill and Caesar’s deal is has been submitted under a preliminary prospectus supplement that can be read here.

The deal would include a broader market share for William Hill, and also a cross-selling on Caesar’s customers along with helping them grow in the media landscape.

“The opportunity to combine our land based-casinos, sports betting and online gaming in the U.S. is a truly exciting prospect,” Caesars CEO Tom Reeg said in a statement. “William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to better serve our customers in the fast-growing U.S. sports betting and online market.”

If William Hill goes with Apollo, then they will have to sell off all of their locations with Caesar’s hurting them in the sports betting world early on. Fortunately, they also have partnerships with CBS and ESPN already.

Depending on the revenue coming in from those deals could be the deciding factor. Still, with the number of locations Caesar’s has across the U.S., it would be detrimental to William Hill’s business in the country.

America is becoming a cash cow among sports betting operators. Almost half of the states in the U.S. have legalized sports betting, and more will be legalizing the new activity over the coming years. Breaking off a partnership with Caesar’s where William Hill has over 100 locations they are operating at would significantly hurt their U.S. business in the long-term.

According to reports, Caesar’s could make between $600-$700 million in 2021 off sports betting alone. The idea that William Hill would give that partnership up for more money in the short-term does not make the most business sense.

The U.K. sports betting operator will be playing with fire if they decide to accept the buy-out offer from AGM.