888 Shares Leap After Restructuring Deal for William Hill Assets
888 Suspends Dividend to Help Pay for William Hill International
(Bloomberg) -- Shares in online gambling operator 888 Holdings Plc jumped the most in 18 months after it announced a new financing structure for its now cheaper acquisition of William Hill Ltd.’s international assets.
888 trimmed its enterprise valuation of the William Hill deal, putting it between 1.95 billion pounds to 2.05 billion pounds, down from 2.2 billion pounds, the company said in an update on the deal’s financing Thursday.
The lower price reflects a “change in the macroeconomic and regulatory environment,” as well as a review of William Hill currently being pursued by the U.K. Gambling Commission, 888 said. The U.K. watchdog is reviewing William Hill’s license, and investors globally have pulled back from big gambling company stocks.
888 also announced an accelerated book build worth about 19% of its issued share capital to pay for the non-U.S. business of 88-year-old British bookmaker William Hill, which has been split off and sold by Las Vegas casino operator Caesars Entertainment Inc. Last year analysts estimated that deal would roughly quadruple 888’s size.
That’s “much reduced” in scale compared to a previous plan of 888 to raise 500 million pounds ($655 million) in equity to pay for the deal, said Jefferies analyst James Wheatcroft in a note to clients.
888 shares rose about 28% in early trading Thursday, the biggest intraday move since Sept. 2020. It expects to hold a shareholder vote for the William Hill deal in May and close the deal in June.
888’s shares are still about 36% lower than when the company announced the deal in September. That follows a market downturn in the wake of Russia’s invasion of Ukraine and a broader investor pullback from gambling companies.
The company also suspended its dividend after it said the planned acquisition of William Hill Ltd.’s international assets would push debt higher than previously expected.
“Ordinarily we would expect this to drag on share price, but the equity raise overhang has depressed the proforma valuation,” Wheatcroft said, referring to the debt announcement.
888 is prioritizing repayments to lenders because its net debt to earnings ratio would be “temporarily running at levels slightly above those previously anticipated,” the company said in the statement. It will resume payouts once the leverage ratio moves below 3 times, or earlier if the board considers it appropriate, it said.
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