The Motley Fool

Is the William Hill share price a bad bet?

Image source: Getty Images

Takeover bids are usually good news for a stock. Offering a premium to market price means current shareholders benefit. Meanwhile, the fact that a company sees value in another is a good sign for it more fundamentally. It was natural then, that the William Hill (LSE: WMH) share price jumped more than 40% when news emerged that Caesars Entertainment was interested in the company.

At the time, this was particularly positive as the company had already seen interest from Apollo Global Management. The problem for fresh investors now however, is that the William Hill share price no longer offers any premium.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

An offer you can’t refuse

 It may seem strange that a casino giant like Caesars Entertainment could be interested in a humble British bookmaker. For some of us, it’s hard to associate the glitz and glamour of Las Vegas with the smoke-filled rooms of the local bookie.

But the interest comes about after legislation changes in the US a few years ago that legalised sports betting. Rather than trying to build this new industry themselves, US firms have imported that model ready-made instead.

Caesars already had a joint venture in place with William Hill. This allowed the bookie exclusive rights to sports betting in its casinos in exchange for a 20% stake in William Hill’s US arm. But this joint venture causes shareholders a potential problem.

Caesars has said that if it accepts an offer from rival Apollo, it will cut its venture with the UK bookmaker. This in effect has allowed it to offer a muted bid, low-balling the William Hill share price. Yes, the £2.9bn offer was an 81% premium to the three-month average share price, but almost all analysts agree this is low.

William Hill share price: further room to rise?

The William Hill share price has been trading above Caesars’ 272p offer price all week. This is natural, given that Apollo has also shown interest and online gambling company 888 is interested in William Hill’s European business if a deal goes through.

Unfortunately though, William Hill’s JV with Caesars may consign other offers very much to the back seat. Losing its sports book presence in the US may not be worth the hassle.

Indeed, the William Hill board has recommended to shareholders that they accept the Caesars offer. For it to go through, 75% of shareholders will need to approve the deal.

Most analysts agree the bid falls somewhat short of its true value, it is hard to see how the company has much choice. Add the fact that the future of its UK and European businesses would see greater uncertainty, I think this is a stock worth avoiding for now.

If we had got in a few months back we may have made some money here, but for me the William Hill share price is just not offering much potential upside today.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Karl 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.