Why Caesars Entertainment (CZR) Is Buying William Hill (WMH) For £2.9 Billion

By Amit Chowdhry ● October 2, 2020
  • Caesars Entertainment, Inc. (NASDAQ: CZR) and William Hill PLC (LSE: WMH) announced that Caesars will acquire the entire issued and to be issued share capital of William Hill for approximately £2.9 billion.

Caesars Entertainment, Inc. (NASDAQ: CZR) and William Hill PLC (LSE: WMH) announced that they have reached an agreement on the terms of a recommended cash acquisition pursuant to which Caesars will acquire the entire issued and to be issued share capital of William Hill for approximately £2.9 billion.

The deal would bring together Caesars as one of the largest gaming-entertainment companies in the U.S. and one of the world’s most diversified gaming entertainment provisions and William Hill as one of the world’s leading betting and gambling companies. The deal is subject to anti-trust and regulatory approvals and completion is expected to take place in the second half of 2021.

Why Is Caesars Buying William Hill?

Caesars said it believes that the sports betting and online gaming sector represents one of the largest areas of growth in the U.S. gaming industry with some analysts recently estimating a potential total addressable market size ranging up to about $30-35 billion, reflecting the acceleration of gaming legislation at the state level, the increased adoption by consumers as gaming becomes more available, and continued integration with national sports and media brands.

And Caesars and William Hill currently operate a U.S. joint venture with 20% and 80% equity ownership respectively. Through this joint venture, William Hill runs online sports betting operations through Caesars’ market access in each state and retail sports betting operations in Caesars’ properties as well as those of other casino operators around the US. And Caesars owns and operates 54 domestic properties in 16 states. The company’s resorts operate primarily under the Caesars, Harrah’s, Horseshoe and Eldorado brand names.

Caesars believes that the current joint venture structure between Caesars and William Hill in the US needs to be broadened in scope in order to fully maximize the opportunity in the sports betting and gaming sector and provide the best possible customer experience. And Caesars believes that a combination of Caesars and William Hill represents a compelling opportunity to improve the offering and experience for the customer:

1.) The combined company would be able to utilize the expertise and assets contained in both companies for better serving customers in the highly competitive online gaming and sports betting space throughout the U.S. And the combined company’s market access across the U.S. would be increased and would benefit from a broad network of sportsbooks locations.

2.) The combined company is going to provide a more unified customer experience by consolidating applications and wallets, and by allowing a more focused branding experience.

3.) The combined company would have a world-class portfolio of assets and brands, including William Hill’s sports betting expertise as well as its established technology program and roadmap, including its scalable and secure Liberty Technology platform.

4.) The combined company will also be afforded the ability to access Caesars’ extensive and pre-existing relationships with dozens of sports teams and events including being the Exclusive Casino Sponsor of the NFL.

5.) Caesars believes that it is important to align with media companies for enhancing customer acquisition and generate excitement and loyalty across multiple products. And currently, Caesars has a multi-year relationship with ESPN and William Hill has a relationship with CBS Sports.

6.) As part of the combined company, William Hill would be afforded new and complete access to Caesars’ brand and highly regarded loyalty program (which had approximately 60 million members at the end of 2019) — which it currently does not have. Caesars believes this synergistic relationship will benefit all customers with integrated benefits across various elements of gaming and entertainment, allowing customers to earn tier status and Caesars Rewards that can be used at all of Caesars’ land-based and online properties, helping to improve customer experience, reducing churn and increasing customer wallet share.

Together with iGaming — which is currently outside the scope of the joint venture — Caesars expects that the enlarged sports and online gaming business in the U.S. could generate between US$600-US$700 million in net revenue in FY2021 (on a pro-forma basis).

Key Quotes:

“The opportunity to combine our land based-casinos, sports betting and online gaming in the U.S. is a truly exciting prospect. William Hill’s sports betting expertise will complement Caesars’ current offering, enabling the combined group to serve our customers in the fast-growing U.S. sports betting and online market. We look forward to working with William Hill to support future growth in the U.S. by providing our customers with a superior and comprehensive experience across all areas of gaming, sports betting, and entertainment.”

— Caesars Entertainment CEO Tom Reeg

“The William Hill Board believes this is the best option for William Hill at an attractive price for shareholders. It recognizes the significant progress the William Hill Group has made over the last 18 months, as well as the risk and significant investment required to maximize the U.S. opportunity given intense competition in the U.S. and the potential for regulatory disruption in the U.K. and Europe.”

“Under the revitalized senior leadership team, William Hill has been delivering on its strategy and potential. William Hill is one of the world’s leading betting and gambling companies, with a long and proud heritage. It is one of the most recognized brands globally. Over recent years, it has transformed from a business once heavily reliant on U.K. retail into a company that is truly diversified by geography and channel, providing a stable standalone platform for future growth.”

“For now, it is very much business as usual. employees will be kept fully informed through this process. In terms of our U.K. and International businesses, we believe they have a strong future ahead and we will work with Caesars to find suitable partners to further the long-term growth prospects of these businesses.”

— Roger Devlin, Chairman of William Hill