William Hill Accepts Takeover Offer From Caesars Entertainment
Online Poker Report

What Caesars Stands To Gain From Its $3.7 Billion Acquisition Of William Hill

Caesars Entertainment will acquire William Hill for $3.7 billion

The US casino and sports betting industries have been abuzz this week with the news that Caesars made an offer to acquire British bookmaker William Hill. This morning, the companies announced that the latter has accepted the offer of £2.9 billion ($3.7 billion).

William Hill went public about the negotiations on Friday, though private talks had already been underway for some time before then. Caesars confirmed its bid on Monday, and William Hill accepted it on Wednesday.

On the surface, the deal isn’t surprising. There has been a trend toward consolidation from the start in the burgeoning US sports betting market. Whether through acquisitions, mergers, or joint ventures, companies have been seeking to pool their strengths. Yet the motivations here might be slightly different, and as much about brand focus and bargain hunting as they are about expansion.

The two companies are already working together in the US market, so the groundwork for a closer relationship was in place. Caesars holds a 20% stake in William Hill as it stands and will now purchase the remaining 80%. Meanwhile, the latter runs a retail sportsbook at 12 of Caesars’ 55 US properties and a William Hill mobile app in four states.

Caesars appeared to have a lot of confidence that the deal would go through this time. Even before William Hill’s formal acceptance of the offer, Caesars announced an underwritten public offering of 31 million shares at a price of $56 apiece. That will raise more than $1.7 billion, which it will use to partially finance the acquisition.

The companies expect to close the deal sometime in the second half of 2021.

Often a bridesmaid, now finally a bride

Caesars itself has already been party to the consolidation trend, having been acquired by Eldorado Resorts earlier this year. In fact, much of the current relationship between Caesars and William Hill comes by way of that deal. It was Eldorado that originally acquired the stake in William Hill, in return for providing nationwide market access.

William Hill, on the other hand, was one of the few big-name companies still flying solo. It has therefore seemed inevitable for a while now that some kind of deal would be coming sooner or later.

Indeed, the two companies engaged in talks for a merger just last year. Prior to that, there had been times that William Hill looked likely to acquire 888 Holdings or to be acquired by The Stars Group (or rather Amaya, as it was known at the time).

William Hill’s stock jumped in price roughly 25% as a result of the initial announcement. Caesars’ investors seem more ambivalent. Its stock saw an immediate jump of around 7.5%, but it has been quite volatile over the days since.

An all-or-nothing proposition

The main hurdle facing Caesars in the deal was a competing bid from private equity firm Apollo Global Management. Fortunately for Caesars, the existing relationship it has with William Hill made its offer one the company would have found it hard to refuse.

Under the terms of the market access deal, there is a list of companies whose acquisition of or merger with William Hill would allow Caesars to unilaterally exit the relationship. What’s more, Caesars has a right to amend that list as circumstances demand, and it added Apollo to it upon discovering the latter’s offer. Had Caesars made good on the threat, it would have left William Hill scrambling to find new locations for its retail sportsbooks.

Following the acquisition, it’s likely that the opposite will happen and William Hill will now take over operations of all Caesars sportsbooks. For the moment, that means expanding from 12 locations to as many as 29. That does not include a further 26 properties in states where sports betting is illegal for the time being.

This dynamic underlies two of Caesars’ likely reasons to want to acquire William Hill in the first place. First, it’s a good time for the two to commit to their relationship. Caesars wouldn’t want to go all-in on William Hill-branded sportsbooks only to have the latter strike a deal with another company whose goals conflict with Caesars’.

Second, holding that leverage allowed Caesars to get a good deal on its purchase. The deal values William Hill at just 2.2x its annual revenue, far less than other companies poised to capitalize on the expanding US market.

A different kind of brand strategy

One goal that all of these deals have in common is sharing expertise. In many cases, it’s a matter of a domestic US company sharing its market expertise with an international company familiar with the new spaces now opening up, namely sports betting and online gambling. Such is the case with Caesars and William Hill.

Of the other deals we’ve seen, the most similar is perhaps MGM Resorts International forming Roar Digital as a joint venture with GVC Holdings. Though no acquisition was involved, MGM and GVC have similar businesses and roles in the relationship as Caesars and William Hill, respectively.

That comparison highlights a key difference in what’s going on here, however. Through Roar, MGM and GVC formed the BetMGM brand that will cover both online casino and sports betting, while keeping a name familiar to patrons of MGM’s brick-and-mortar properties.

Most other operators are employing a similar strategy. For instance, the daily fantasy sports companies DraftKings and FanDuel expanded their existing brands into the sports betting and online casino verticals rather than creating or acquiring new ones.

Caesars, on the other hand, looks as if it will be compartmentalizing its brands. Its self-branded sportsbooks aren’t big money makers and might be phased out in favor of the William Hill brand. Meanwhile, it has already been keeping its WSOP.com online poker room at arms’ length from the rest of the company. Following a William Hill acquisition, then, the Caesars brand might end up used exclusively for casino products.

There’s almost no other example of such separation of brands by vertical in the US at the moment. The closest thing is The Stars Group spinning off the new Fox Bet brand in partnership with Fox Sports. However, it still uses the PokerStars brand for both poker and casino.

Sacrificing cross-sell for flexibility

There’s an obvious downside to doing things this way. Other operators bank heavily on cross-selling as a marketing strategy. This can be particularly important for online casinos, where the cost of acquisition and average lifetime spending of a typical user are both high. Getting people in the door with another vertical and then convincing them to try the casino products is an effective tactic. That’s hard to do when each vertical has a different brand.

For a company in Caesars’ position, however, cross-vertical migration might be less important, or even harmful. It stands to reason that its land-based casino empire would tend to recruit players directly into the casino vertical. There’s little incentive for it to want to convert those players into poker or sportsbook users. Meanwhile, it can still enroll players in its Total Rewards program through WSOP and William Hill, and sell them on casino products that way.

At the same time, it will give Caesars more granular brand control. Single-brand companies have to consider all their verticals when forming a marketing strategy and focus on the same customer base for all of them.

That’s probably the reason, for instance, that DraftKings and FanDuel do so well with blackjack, but less well with higher-yielding slots products. Their sports customers don’t match the standard casino demographic and prefer different products, which impacts the companies’ bottom line.

Thus, one final potential advantage of the deal for Caesars is that it will be able to manage its brands and verticals separately. The Caesars casino, William Hill sportsbook, and WSOP poker products can all support each other, while also having their own marketing strategies and target audiences. How that balances out against weaker potential for cross-selling is a question that only time can answer.

Alex Weldon
- Alex is a freelance writer and artist living in Dartmouth, Nova Scotia. He has been doing data-based analysis of the online gaming industry since 2016.
Privacy Policy