Playtech could complicate William Hill - Sportingbet deal

With the champagne corks still popping over Thursday’s agreement by William Hill plc and GVC plc to acquire Sportingbet plc , Playtech introduced a sobering note with a reminder that in terms of its participation in the William Hill Online joint venture, William Hill plc is “…bound to conduct its remote gambling business through the William Hill Online business, in which Playtech is a 29 per cent shareholder.”

In a statement released by Playtech, CEO Mor Weizer points out that William Hill plc had earlier indicated an intention to exercise its option to buy the Playtech stake in WHO, and an evaluation process had started.

Weizer claims in the statement that if the WH/GVC Offer is completed, William Hill will be obliged to offer to sell the remote gambling activities of Sportingbet to William Hill Online within six months of completion of the acquisition…and Playtech has the right, in its absolute discretion, to determine whether William Hill Online accepts such an acquisition.

“Playtech believes that it is likely that the acquisition of the Sportingbet activities would add considerable value to William Hill Online,” the statement continues.

“The acquisition would offer a range of potential cost and sales synergies including access to new customers in regulated markets including Sportingbet’s established business in Australia, where William Hill Online currently does not have a footprint.

“Playtech expects that the potential contribution of the Sportingbet activities and associated synergies and cost savings will be taken into consideration as part of any valuation of William Hill Online,” the statement suggests, adding that Playtech will decide upon the merits of a WHO purchase of Sportingbet activities if and when it is invited to do so.

Such an acquisition by WHO should take place within three months of any such agreement, and at a price determined on a stand-alone basis for the Sportingbet activities.

Playtech accepts that it would need to provide its share of the acquisition funding or agree an alternative financing mechanism with William Hill.

Weizer points out that the William Hill evaluation in connection with taking over Playtech’s stake in WHO is due to end in late February 2013.

The valuation process is being undertaken on the basis of the value of William Hill Online as a whole with no discount for minority nor premium for control, he emphasises.

“Following completion of the valuation process, William Hill will have a short period to determine whether it will exercise its option at the value determined by the process and, if it wishes to proceed, must complete the purchase by the end of April 2013, failing which the call option will lapse,” he warns, adding that WHO is a key driver in William Hill plc’s remote gaming success, and reiterating that Playtech is “….dedicated to maintaining its close working relationship with William Hill to support its continued growth.”

Reading between the lines, it appears that Playtech is applying pressure to drive up the potential purchase price of its 29 percent interest in WHO.