Even before the end of this week, it had been a good year for shareholders of William Hill (LSE: WMH). Then, on Friday, the share price exploded upwards, leaping more than two-fifths in a single afternoon. What’s going on?
The William Hill share price slumps…
At the end of 2019, the share price closed at 188.45p. It then drifted upwards, reaching 196.05p on 12 February. Then, news of a potentially fatal virus spreading across Europe hit the shares.
As sporting events across the world were cancelled for safety reasons, the shares collapsed. At their low on 18/19 March, the shares had crashed to 36.7p, down more than 80% in under three months. Ouch!
..and then surges, before soaring
After bottoming out in late March, the William Hill share price rose almost relentlessly, hitting its 2020 high of 225.9p only last Wednesday. Then, shareholders were sitting on a 2020 capital gain of almost a fifth (19.9%). Given the FTSE 100 is down 22.5% so far this year, happy ‘Billy Hill’ shareholders were riding high.
Then, just after 1pm on Friday afternoon, came a regulatory announcement from William Hill. It revealed that, following recent press speculation, it confirmed that it had received “separate cash proposals from…Apollo Management International…and Caesars Entertainment.”
This followed an initial written approach from Apollo on 27 August, followed by a follow-up proposal from Apollo and proposals from Caesars. This news set fire to the William Hill share price, sending it shooting into the stratosphere. At Friday’s close, the shares stood at 312.2p, up a whopping 43.5% in a single afternoon. Wow.
What’s next for the William Hill share price?
Of course, I can’t tell you exactly where the William Hill share price will go. However, I can tell you that, in City parlance, it’s the target of a ‘bidding war’. And when two or more deep-pocketed investors fight each other over highly prized assets, theses wars aren’t won in a day, but rather in weeks or months.
For the record, Apollo and Caesars are two very powerful and long-established organisations. Founded in 1990, Apollo is one of the world’s biggest private-equity investors/buyout firms, with $400bn in assets under management. Similarly, Caesars is one of the world’s largest gaming firms and owner of the famous Caesars Palace hotel on the Las Vegas strip.
If I held the shares, I’d sit on my hands
Thus, with two Goliaths battling for control of the company, I suspect that the William Hill share price may have some way to go. Even after Friday’s huge leap, the market value of its equity is a mere £3.28bn. That’s chicken-feed to US giants accustomed to doing 11-figure deals, especially given that US states are rapidly opening up to legal sports-betting.
Right now, discussions between William Hill and its suitors remain ongoing. Under UK takeover rules, bidders have until 23 October (four weeks) to unveil firm plans or walk away. Hence, I think shareholders should sit tight and do nothing. I suspect that there could well be more life left in the William Hill share price!
Cliffdarcy 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.