“Transformational acquisition creating a global leader with significant scale in the fast-growing online sports betting and gaming industry.” That’s how the latest news from 888 Holdings (LSE: 888) was announced Thursday.
The acquisition will see 888 buying up William Hill International’s European business. The purchase, from current owner Caesars Entertainment, is at an enterprise value of £2.2bn. Caesars had made it clear when it bought William Hill in April that it only wanted the firm’s US operations.
Chief executive of 888 Holdings, Itai Pazner, said: “This transaction will create one of the world’s leading online betting and gaming groups with superior scale, exceptional brands, increased diversification, and a platform for strong growth.”
The combined group will have more than 12,000 employees. The merger is expected to achieve cost-saving synergies of at least £100m per year by 2025. As well as any direct financial benefits, 888 also sees the William Hill high street brand in the UK as a valuable asset.
888 Holdings’ financing
The deal will be funded initially by £2.1bn of new debt financing, which has already been secured. But 888 also intends to raise approximately £500m by issuing new equity “at an appropriate time“. The company has set a medium-term target for its net-debt-to-EBITDA ratio of below three times.
The deal will still need shareholders’ approval. And it is in a regulated industry, so it also needs to get nod from the Financial Conduct Authority. Gauging the market’s reaction so far is tricky, with the 888 Holdings share price down 2.8% by mid-afternoon Thursday. But it was a day of falling markets anyway.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.