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Best of Chris Sieroty

Gaming Guru

Chris Sieroty

William Hill must decide soon on purchasing Playtech stake

17 September 2012

William Hill plc, owner of William Hill U.S. and 159 sports books and kiosks in Nevada, has until November to decide whether to exercise its option to purchase Playtech Ltd.'s 29 percent stake in its online business, according to an industry analyst.

The buyout would put an end to a very lucrative partnership that began in 2008 when the Israeli software firm paid approximately $319.7 million for its stake in William Hill Online. In return, Playtech provides software for the online casino and poker games, and the personnel to market the website.

William Hill Online accounted for more than a third of the British bookmaker's $441.4 million in profits last year. In its latest earnings report, William Hill confirmed it will have an opportunity to buy out Playtech's stake through the first of two contractual call options.

"Our chairman and chief executive continue to meet regularly with their counterparts (at) Playtech ahead of this," the company said. "Discussions have been amicable and continue."

The relationship between the two firms has been strained at times in the last year.

In September 2011, William Hill Online staff in Tel Aviv staged a strike over allegations that William Hill planned to relocate the online staff from Israel to Gibraltar.

During William Hill's licensing hearings in June, Nevada regulators questioned CEO Ralph Topping and other executives at length about their partnership with Playtech and the possibility of purchasing the software company's stake in the online business.

Playtech was founded by Teddy Sagi, a Tel Aviv-born businessman convicted of fraud and bribery in 1996. Sagi is a shareholder in Playtech, a company listed on the London Stock Exchange that supplies software to online gambling companies, including Betfred and Paddy Power.

William Hill is licensed to operate sports books, kiosks and betting apps in Nevada, but its William Hill Online division has not been licensed.

William Hill officials in London were unavailable for comment Monday.

Simon French, an analyst at Panmure Gordon & Co., noted that William Hill was considering a retail bond offering, which could be used to fund the purchase. French said in a note to clients that William Hill would need to pay about $590.8 million to purchase Playtech's stake in William Hill Online. UBS, Deutsche Bank and JP Morgan have valued Playtech's stake at $566.1 million.

"Playtech has the option to take up to 10 percent of William Hill shares as part of the consideration," French said. "Given Playtech's difficulty in spending the funds it raised in November 2011, that could yet prove to be an appealing option."

French expects William Hill's purchase of Playtech's stake to increase pretax profits by about 3 percent. He also reiterated his "Buy" recommendation and his $560 target price as the "group's multi-channel, regulated markets approach continues to bear fruit," including a contribution from the acquisitions in Nevada.

Shares of William Hill closed at $498.62 a share Tuesday on the London Stock Exchange.

William Hill entered Nevada in April 2011 with its $55 million purchase of American Wagering Inc., owner of Leroy's; Brandywine Bookmaking LLC, owner of Lucky's; and Club Cal Nevada's sports book business. The company also operates sports books at Affinity Gaming properties statewide, and recently launched an upgraded and rebranded sports wagering app that it acquired from American Wagering.
William Hill must decide soon on purchasing Playtech stake is republished from