Hill deal to take full control of online division

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BOOKMAKER William Hill said a £424m deal to take full control of its online business will give it freedom and scope to step up internet and international expansion.

The group yesterday confirmed a rights issue to buy the remaining 29 per cent of William Hill Online it does not own from software development firm Playtech.

Britain’s biggest bookmaker plans to raise £375m by issuing two shares for every nine held at a price of 245p. That is a discount of almost 40 per cent to Wednesday’s closing price.

The deal also includes £50m of bridging debt. The price is worth 9.3 times Playtech share of the venture’s underlying earnings.

Chief executive Ralph Topping said: “This move rounds off a successful 12 months which have seen us take our first steps into the US and, through the pending Sportingbet acquisition, lay the foundations for growth in the attractive Australian market”.

William Hill triggered an option to buy the stake held by Playtech since the venture was set up in 2008.

The company said the rights issue price was determined by three investment banks.

Online has proved the bookmaker’s fastest-growing business, helping it to surging annual profits and revenues.

Group sales increased 12 per cent to £1.3bn in 2012 and underlying pre-tax profits were up 22 per cent to £292.7m.

Its online operating profits surged 36 per cent to £145.3m on net revenues up 27 per cent at £406.7m.

Sports betting on mobile phones was the biggest factor in the latest online improvement, particularly in-play bets in football, basketball and tennis.

The margin William Hill earned on in-play betting increased to 4.8 per cent from 4.5 per cent. Margins from pre-match betting rose to 10.1 per cent from 8.7 per cent.

The UK accounted for almost three quarters of online revenues.

Mr Topping said the deal is a “major milestone” and gives it the “flexibility to pursue its strategy” through simplified ownership.

It plans to invest in developing its online products and website, and make small acquisitions. The deal could also help it expand in the US and Australia.

It is a “compelling opportunity to strengthen future growth prospects”, said William Hill.

Under the joint venture with Playtech, it was limited in how much capital it could plough into online.

Future deals or developments in mobile and online also had to be offered to the joint venture for purchase – a right which will now cease.

The deal needs shareholder approval at a meeting on March 18.

William Hill is also on the verge of completing a £460m deal for the Australian arm of Sportingbet.

William Hill’s core business of more than 2,300 betting shops also made progress, with operating profits up seven per cent to £211.5m despite more horse-racing fixture cancellations and weak trading during the Olympics.

Mr Topping said it was wrong to write off traditional land-based betting despite the fast growth of online. “Any company that goes with one view of the world risks missing an opportunity.”

William Hill employs more than 15,000 people, including around 3,000 staff in Yorkshire, of which more than 1,100 are based in Leeds, where the company has two offices.

Under its retail section, operations, human resources and marketing are all based in Leeds, while trading and IT for the whole group are also in the city. The company also has a call centre in Sheffield.

The bookmaker recently expanded its footprint at St Johns Offices in central Leeds, taking a further 6,544 sq ft on the fourth floor of the building on a six-year lease. Trading director Terry Pattinson said it hired another 25 people in its in-play trading department, taking staff to 85, and plans to grow by a similar number this year.

A spokeswoman said it was too soon to quantify the impact of the online buyout on its Leeds operations.

“The news that we will control more of our business can only have a positive impact on employee numbers,” she said.

Analysts at Panmure Gordon stockbrokers said: “We think William Hill is paying a sensible price for Playtech’s shareholding in William Hill Online and the strategic rationale is compelling.

“The financial rationale is less compelling given the size of the rights issue which is higher than we had forecast, but combined with the Sportingbet assets acquisition we still see estimated 2014 earnings per share about 6.6 per cent higher at 31.1p.”

Greg Johnson, analyst at Shore Capital, said the group has made a “robust” start to the year.

“Current trading appears strong with continued strong volume growth online, resilience in retail and favourable sporting results,” he said.

“We believe that the two deals transform William Hill into a fast-growing online operation and there remains scope for further multiple expansion,” he add- ed.