Top William Hill investor unhappy with Amaya possibilities

Parvus Asset Management, a major stakeholder in William Hill plc, has come out strongly against the current merger talks with Amaya (see previous  reports), claiming in an open letter Thursday that the proposal defies strategic logic and will destroy shareholder value.

The 14.3 percent shareholder made it clear that it would oppose any reverse takeover as reported in the negotiations between William Hill and Amaya, and suggested that the William Hill board should consider all alternative options for maximising shareholder value, including a sale of the currently struggling company.

In a follow-up to the open letter, Parvus co-founder Mads Eg Gensmann told the Reuters news agency that the William Hill board of directors’ judgement was clearly lacking in the pursuit of Amaya, observing:

“It shouldn’t take more than five minutes of the board’s time to realise this deal doesn’t pass the smell test.”

A William Hill spokesman responded to the attack by commenting that, given the strategic fit, diversification and potential synergies of an Amaya deal, the directors had a responsibility to fully assess it.

“However it is premature for us to draw conclusions whilst this work is ongoing,” he said. “The Board would not come forward with a transaction unless it was satisfied that it was in the interests of all shareholders.”

Parvus interests in William Hill are valued at GBP 370 million through 14.3 percent of the outstanding shares held through CFDs; the company has indicated it is prepared to convert these derivatives into shares if it proves necessary to vote against the Amaya merger.

The open letter claimed that Parvus had been largely supportive of William Hill management despite “many operational missteps and weak share price performance.”

It also flagged areas that are likely to prejudice William Hill in the deal, including:

* Amaya’s core business is in the online poker segment, which is generally in decline and is likely to weaken William Hill’s long term strategic position;

* Canadian-UK currency values and the financial structure of a merger deal would favour Amaya shareholders over William Hill investors, with William Hill effectively buying an over-valued asset using undervalued currency;

* Amaya’s heavy debt burden – Parvus quantified that a merger would boost net debt by GBP 2.8 billion;

* The $870 million fine imposed on Amaya by a Kentucky court in respect of the US activities of Pokerstars after the UIGEA was passed;

Parvus appears to be concerned over the recent rejection by William Hill directors of a merger approach from 888 Holdings and the Rank Group (see previous reports) and made several comparative references to this in its open letter, claiming that “blatant” double standards were being applied by the directors in the Amaya deal.

“We strongly encourage that the board and management [of William Hill] stops wasting valuable time and shareholder resources pursuing this value-destroying deal,” the investment company urged.

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