Bookmaker William Hill (WMH) jumped 7.5% to 337p on Monday morning after online bookie 888 (888) and Grosvenor Casino-owner Rank (RNK) admitted they were weighting up a joint bid for the £2.9 billion cap.
Shares in 888 advanced 3.1% to 228.8p, while Rank remained flat at 237.1p after confirming their interest in the UK’s largest bookie by number of shops. Under competition rules they have until 21 August to make a bid, although some analysts are already talking down any chance.
If a successful bid is made, and shareholders approve it, the merger would create a high street betting and casino giant with, according to Berenberg’s calculations, a 25% share of the online market.
This would be the latest of several mergers in the market, which includes the potential tie-up between Coral and Ladbrokes (LAD) and the £5 billion merger of Paddy Power and Betfair.
Higher taxes, tougher regulation and a race to increase online market share is forcing companies across the industry to join forces.
Interest in William Hill comes less than a week after kicking out chief executive James Henderson. Failing to boost the online presence was blamed, while a profit warning following the Cheltenham Festival did not help.
If a bid is made it would not be the first time that William Hill has sat across the negotiating table with 888. The potential target tabled a £720 million offer for the website operator in February 2015, which was rejected by shareholders.
Rank’s chief executive Henry Birch is also familiar with William Hill having once led its online business.
Investment bank Berenberg describes the deal as complicated due to it involving the merger of three large operators and gives it a low chance of succeeding.
‘On a standalone basis, we believe William Hill’s fundamentals at present are weak, the earnings momentum is not favourable and the road to recovery longer than consensus currently expects. We did not think William Hill could be a takeover target for any competitor given its size, and we certainly did not expect two players to form a bidding consortium.
‘We think the stock will bounce today, but we also believe that the likelihood the deal actually goes through is not high.’