Thursday, 20 September 2012

Will Sportingbet finally get a takeover bid?

For some time there has been talk that Sportingbet would be a takeover target for one of the bigger players in the bookmaking industry.  Ladbrokes pulled out of one potential bid a while back and ever since then the share price of Sportingbet had been somewhat depressed, but it had its supporters who felt that it was cheap and undervalued regardless of any potential takeover. However, the price has been flying recently and yesterday confirmation came that William Hill was in the early stages of launching a potential bid with GVC Holdings.
Any offer would be substantially in cash with an element of GVC paper. William Hill intends that the entity initially acquiring the Regulated Businesses would be a subsidiary of William Hill and not William Hill Online. GVC and William Hill reserve the right to amend the terms and structure of the possible offer in due course.

The Boards of William Hill and GVC believe that by acting in combination they represent a highly credible possible offeror for the entire Sportingbet business, substantially in cash.

No formal approach has been made to the Board of Sportingbet and there can be no certainty that any offer will be forthcoming and nor as to the terms on which any offer might be made.

In accordance with Rule 2.6(a) of the Code, William Hill and GVC must, by not later than 5.00 p.m. on 16 October 2012, either announce a firm intention to make an offer for Sportingbet in accordance with Rule 2.7 of the Code or announce that it does not intend to make an offer
http://www.digitallook.com/news/rns/20373524-14283/WMH-Response_to_recent_share_price_movement_html

There is likely to be much speculation and talk about what any bid price might be, but already there are predictions which make it substantially more than the current price of around 54p.
William Hill and GVC would not comment on the possible value of a bid but Ivor Jones, gaming analyst at Numis, suggested any potential buyer would have to pay as much as £1 a share.
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9554300/William-Hill-considers-joint-offer-for-Sportingbet.html

To some degree Sportingbet has been here before with the Ladbrokes takeover talk that saw the price rise then fall a long way when the bid collapsed.


At that time the opening pitch from Ladbrokes was talk of 70p a share, although as often happens city talk was looking a lot higher.
James Hollins, an analyst at Evolution, suggested a possible take-out price of 80p-90p a share, adding that a deal could bring annual synergies of more than £30m.
"We think a deal makes sound strategic sense for Ladbrokes as it would instantaneously establish a market-leading position in more than 10 global territories, including the key Australian, Spanish and Greek markets," he said. 
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/8594873/Ladbrokes-makes-takeover-approach-for-Sportingbet.html

In the end, Ladbrokes decided that the deal didn't make sense to them and pulled out.
The takeover of Sportingbet by rival Ladbrokes was scuppered today due to concern over the online betting group's Turkish operation and increasingly turbulent market, Ladbrokes confirmed. 
Ladbrokes chief executive Richard Glynn said the abandoned approach was not a 'failure' and saved the company from entering a deal which would not have delivered value to its shareholders.

Mr Glynn said: 'Having completed our analysis we have been unable to agree a structure which delivers increased shareholder value within an acceptable regulatory environment.'
http://www.thisismoney.co.uk/money/markets/article-2047368/Ladbrokes-takeover-Sportingbet-scuppered.html

Sportingbet sold off its Turkey business soon after for around £125million and look who was involved in that.
Isle of Man-based GVC, which runs betting websites for German, Latin American and Turkish punters, had acquired Sportingbet’s business in Turkey for €142.5 million last year when Richard Glynn, Ladbrokes boss, turned away from the takeover negotiations. 
http://www.thefinancepages.co.uk/companies/william-hill-sportingbet-acquisition/02300/

So, GVC clearly likes what Sportingbet had to offer even when Ladbrokes didn't.  Does this mean that this takeover is more likely to happen?  It probably has a better chance than the Ladbrokes attempt if only because of the GVC history and the fact that William Hill will get Sportingbet's lucrative Australian business, so it could happen.  One would likely expect any eventual bid to be at least in the 80-100p range, although that was clearly too hot for Ladbrokes liking.

An obvious word of warning is needed on what will happen if the bid doesn't happen?  History suggests that the Sportingbet share price would then fall heavily, although as a company in its own right it still looks quite good, dividend yield at the current price is around 3.3p and that is after a big rise in price from around 30p to just over 53p today in the last few weeks.

However, if this bid were to not happen Sportingbet shareholders may then wonder just who would bid for it given the two biggest players in the UK, Ladbrokes and William Hill, will have dropped out.  Only time will tell and William Hill and GVC have until 16th October to make their intentions clear, but maybe the GVC connection will see a bid this time, then we will see how Sportingbet responds. The share price could see a wild ride between now and then, especially if at any stage a bid looks like falling through. If you like a gamble though on the takeover actually happening and are willing to take the risk of it falling through, you could double your money if a top end price is paid.

7 comments:

  1. Sportingbet update. I was interested to read the comments of Robbie Burns the Naked Trader yesterday, who has been a buyer of the company recently and is sitting on big profits. He sums up the dilemma nicely of what to do if you are sitting on profits from the current rise in price, but it also raises the question of the risk of getting in now and hoping for a bid. It is a gamble.

    "Now the big one. It's a brilliant problem to have but how much of the massive SportingBet profits I have should I bank? Or should I stay with it? Or should I just bank it all?

    SportingBet is now in the bid spotlight with William Hill interested.

    Hard to know in these situations whether to take profits or sit tight, If the bid goes through or rival bidders emerge it could go up to 65-70p. However if the interest dies off then we are probably back to 35, which makes it somewhat of a gamble.

    The other problem is I have absolute shedloads of SportingBet. Seriously more than you can comfortably imagine which means I really think I had to bank at least part profits here.

    So I have indeed parted with some and I expect to hold the rest and take a chance the bid will go through. Hills has to put up or shut up by close of play on Oct 16th. So not too long to wait!

    A bid for SportingBet did fall through before but I reckon the odds of it going through this time are about 65-35 which the current market price of 51ish probably tells the story.

    Anyhow to try and mirror my actions I've sold half the website holding for a profit of £3,600. The other site holding has a paper profit of £6,000.

    I suppose weighing up this one is the old fear emotion. Fear of missing out on a bigger profit and fear of missing out on a profit at all ! Hard one"

    www.nakedtrader.co.uk

    I think that 65-70p bid might be on the low side, but if none happens this could easily fall back to 35-40p.

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  2. Well, first reports of the level of bid, if true, seems too low. Can't see Sportingbet accepting this. The talk here is of a 60p bid, which still seems low considering some were suggesting a few weeks ago that a bid might have to go up to a pound a share. If the opening salvo is 52.5p then I doubt WH and GVC will go to a pound.

    "William Hill and GVC submitted a 52.5p a share bid to Sportingbet by letter, which was unanimously rejected by the online bookie’s board.

    The £350m bid would have seen William Hill put up 45p a share in cash while Sportingbet investors would have received the remainder in GVC paper.

    A spokesman for William Hill would not comment on Sunday but it is believed that Ralph Topping, the bookie’s outspoken chief executive, and GVC boss Kenny Alexander will agree to raise the stakes before a Takeover Panel deadline on October 16.

    Analysts expect the two joint bidders will have to offer more than 60p a share, even though the online bookie’s share price has not gone north of 52.25p since William Hill and GVC announced on September 19 that they were in exclusive talks about making a joint approach. A 60p a share bid would value Sportingbet at £400m."

    http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/9577606/William-Hill-to-up-the-stakes-on-Sportingbet.html

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  3. Further update.

    Online gambling firm Sportingbet Plc said a 350 million pound offer approach by bookmaker William Hill and GVC Holdings "significantly undervalues" it, but left the door open for a higher bid.

    It had received a takeover approach at 52.5 pence per share, consisting of 45 pence in cash from William Hill and 7.5 pence in shares in smaller online betting firm GVC, Sportingbet said on Monday.

    "The board of Sportingbet has responded that this indicative offer significantly undervalues the business and its future prospects," it said.

    However, it did not say it was rejecting the offer outright.

    http://uk.reuters.com/article/2012/10/01/uk-sportingbet-offer-idUKBRE8900D620121001

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  4. Sportingbet reports tomorrow, will be interesting to see if it has any impact on the likely bid price.

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  5. Interesting run of developments. Am directly interested myself as I own a few shares in the GVC outfit getting cosy with William Hill. Enjoying the ride!

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    1. William Hill and GVC have to make their bid proposal by Tuesday, 16th. It will be a surprise if they don't make one and 60-65p would be the minimum range I would have thought. Considering some analysts were suggesting 80-90p or even around 100p, 65p seems low, interesting to see if Sportingbet accept that.

      What attracted you to GVC?

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    2. Actually, on second thoughts as WH/GVC have already put one offer in at 52.5p I'm wondering if they do have to put another in by the 16th?

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