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Last Friday, October 7, Reuters let the world know that William Hill and GVC were in the running to acquire Amaya. Within hours, William Hill had put out a joint statement with Amaya confirming that they were in “discussions regarding a potential all share merger of equals.”
The absence of a similar note from GVC strongly implies that the owner of partypoker is a long way short of the progress made by William Hill, and it would now be unusual for them to make an “expression of interest.”
Private equity companies who, according to reports, may also be interested in Amaya, don’t have the same disclosure requirements as quoted public companies.
They may still be live as potential bidders, but the tone of the Amaya statement also implied that the Amaya board of directors likes the idea of the William Hill merger and may have less interest in a private equity bid.
The joint press release contained the positive statement that:
“The potential merger would be consistent with the strategic objectives of both William Hill and Amaya and would create a clear international leader across online sports betting, poker and casino.”
A graphic from the most recent Paddy Power Betfair results presentation highlights the point.
A merger of Amaya and William Hill would create a company with online gambling revenues only slightly short of those of Bet365.
William Hill’s extensive land-based betting shops add an extra revenue component that would probably elevate the combined group’s market capitalization to the highest in the online gambling world.
The more Amaya praises William Hill, the less chance of GVC getting its foot in the door.
William Hill makes 84 percent of its revenues from the UK market, according to its 2016 half year results. Amaya has a large position in the UK, but brings a much bigger global footprint.
William Hill is committed to operating in the regulated gambling sector, and PokerStars’ experience with global gaming regulation may help William Hill with its international expansion.
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William Hill is extremely active in Nevada where it operates 103 of the 187 sports books in Nevada. It has recently signed new deals with the Silver Legacy and Circus Circus Resort Casinos in Reno and rolled out the first “Virtual Racing” product at the Plaza Casino and Silver Sevens Casino in Las Vegas.
It is also positioning itself for legal sports betting in New Jersey, where it is “working with Monmouth Park racetrack in New Jersey to create William Hill sports bar that could be converted into a sports book should the law permit it.”
Going further, the probity of William Hill’s regulatory position in the US can do nothing but help the chances of PokerStars in California.
Whether it is “bad actor” or “legacy assets,” the opponents of online poker in California can throw less dirt at a PokerStars which will have passed through so much corporate change since it last operated in the state.
There is a world of difference between a merger and a leveraged buy-out (LBO). In an LBO such as the one Amaya used to acquire PokerStars, the combined company is burdened with a large debt after paying off the former shareholders.
The merger deal under discussion between Amaya and William Hill would involve no extra debt. The two boards just need to agree on a valuation of each company, then after getting shareholder approval, issue shares in the newly merged company according to the proportion of value each partner has brought to the table.
On the other hand, a merger is a much more difficult end-state to achieve. There are endless issues that must be resolved amicably otherwise the whole thing can fall apart.
Who will be the new Chief Executive? What will the new board composition be? Where will the business be headquartered? And a myriad of other less important issues can derail the process.
Even given all the potential pitfalls ahead, with enthusiastic initial support from Amaya’s board, a strong corporate story and silence from GVC, William Hill is looking good to be the next owner of PokerStars.