Israeli online gambling company 888 Holding plc (LSE:888) is again trying its luck at a merger with another company. Controlled by the families of Aharon Shaked and the late Avi Shaked the Ben Yitzhak family sold its stake in the company only recently 888 again hopes to be sold to or to acquire another company, or to create some kind of merger that will preserve its competitive advantage and enable it to make a big step forward.
888 is trying again in a market undergoing a significant process of consolidation.
The Shaked family wanted more
The first attempt was a sale to William Hill in the winter of 2015. William Hill wanted it, offered a price, but the Shaked family wanted more. In this case, the Shakeds' demand proved to be justified. William Hill offered £2 per share, while the 888 share price is now £2.22. The second attempt was the acquisition of Bwin.Party in the summer of 2015. 888 was willing to sign a check for £1.15 a share, but GVC was more determined, and paid £1.30, leaving 888 empty-handed. This will be the third try.
"The Times" today reported that 888, traded at a value of $1 billion, and the UK Rank group, traded at a value of $1.2 billion, were negotiating a merger that would create a company with a value of £2 billion ($2.6 billion). Rank, one of the veterans in the non-online gambling market in the UK, operates casinos under the Grosvenor brand and bingo clubs under the Mecca brand - and online business, too, of course.
The "Times" asserted that the talks between the two companies were fairly advanced, and that the companies would officially announce the talks tomorrow. "City sources said the move was being labelled a merger, although it is unclear how Rank and 888 are structuring the transaction," the "Times" wrote, meaning who would acquire whom, and so forth. In short, there are still many open questions, and so investors should take these talks with a grain of salt concerning their chances of success.
Since we have already mentioned William Hill, a source close to the companies told the "Times" that the overriding purpose of the two companies' merger was to acquire William Hill, one of the two leading UK online gambling companies. The other is Ladbrokes, and in the case of William Hill, the above-mentioned acquisition attempt was inspired by the company's financial problems and its inability to adapt itself to the changing market, in terms of both regulatory problems and to the consumers. Last week the William Hill CEO was fired, and the company's share has already lost 21% of its value since the beginning of the year, while 888 has gone up 25% - the result of excellent management by new CEO Itai Frieberger.
Two major mergers in the industry
Meanwhile, the industry is beginning to digest two other mergers besides that of GVC and Paddy: Bwin.Party Power and Betfair have created a company worth £6 billion (£7.8 million), and Ladbrokes and Gala Coral are waiting for antitrust approval in the UK for a merger that will create a £2.3 billion company ($3 million).
One more thing - there is an acquisition that 888 regrets - very much so: Playtech. 888 tried to enter the growth social games market in 2010, just before Playtech was acquired by Caesars, by acquiring Israeli company MyTopia for $18 million. The acquisition failed - because MyTopia's product was not good enough, and 888 is torn up about it now. Just think where it would have been now with an asset worth $4 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on July 24, 2016
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