Should William Hill exercise its buy option on William Hill Online?

In a note to investors this week, Panmure Gordon analyst Simon French discussed the possibility of William Hill plc buying out its Playtech plc partner’s 29 percent interest in the highly successful William Hill Online venture.

The note reveals that JP Morgan, Deutsche Bank and UBS have independently valued Playtech’s share of the business at $566.1 million, and that William Hill is considering a retail bond offering to raise around $590.8 million to buy Playtech out of the business, with a November deadline in sight.

French informed his clients: “Playtech has the option to take up to 10 percent of William Hill shares as part of the consideration [in a buy-out of its WHO interest]. Given Playtech’s difficulty in spending the funds it raised in November 2011 that could yet prove to be an appealing option.”

Such a purchase could increase WHO profits by circa 3 percent, French opined, and he repeated his “Buy” recommendation.

Playtech contributed its skills, technology and around $320 million to the WHO joint venture when it formed 4 years ago, and could see a handsome return on investment if William Hill exercises its buy-out option.

In the company’s recent financial reports the possibility was mentioned, with a note that revealed: “Our chairman and chief executive continue to meet regularly with their counterparts at Playtech. Discussions have been amicable and continue.”

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