888, William Hill and Rank in merger talks

After a flurry of successful and attempted mergers/takeovers last year, things have been a bit quite on the M&A front so far this year, aside from Gala Coral & Ladbrokes which is still bubbling along.

Yesterday things got interesting again.

The  BBC reported that William Hill have been approached by 888 and Rank Group (owners of the Grosvenor Casino brand) to consider a possible 3-way merger.

William Hill have described the talks as ‘highly preliminary’ and have also questioned whether the combined group would ‘deliver superior value’. But I guess if you’re trying to extract maximum value for your shareholders you have to play hard to get. 888 did just that only last year when the shoe’s were on opposite feet…remember William Hill’s failed 888 takeover attempt?

888 and Rank have told the media that there was, ‘significant industrial logic in the combination’.

We’re a long way from knowing the mechanics of the proposed combination, or indeed if it will ever eventuate. The market seems reasonably amenable to the idea. Shares in both William Hill (up 5%) and 888 (up 3.5%) increased on the days trade while Rank was down slightly.

The combined market value of Rank and 888 is about £1.7 billion; considerably less than William Hill’s current market cap of around £2.8 billion.

Even if the merger goes ahead, it’s unlikely we’ll see their live casinos transformed in any significant way. It’s more likely we’ll see a single corporate entity (with backoffice savings), and multiple operating brands much like the Paddy Power Betfair agreement.

Let’s wait and see.