(Adds details, shares)
By Pranav Kiran
Aug 10 (Reuters) - Casino and bingo hall operator Rank GroupPlc and online gambling company 888 Holdings Plc called on Wednesday for talks with the board of William Hill Plc after their proposed joint bid was rejected by theBritish bookmaker.
William Hill spurned their 3.16 billion pound ($4.11billion) offer on Tuesday, saying the 16 percent premium"substantially undervalued" the business.
Rank and 888 said in a statement laying out their case forthe merger that the enlarged group would be "the UK's largestmulti-channel gambling operator by revenue and profit", with 92percent of its business from regulated markets.
William Hill is set to lose its leading market position to amerger of Ladbrokes and Coral and has failed to keeppace with rivals in fast-growing online gambling.
Gambling faces higher taxes and tighter regulation, and aseries of mergers has intensified competition as firms marketthemselves to younger sports fans betting via mobile apps.
Under the proposed terms, William Hill's shareholders wouldhold 44.7 percent of the combined group, 888's 25.7 percent andRank's 29.6 percent.
The bidders said Rank's chief executive Henry Birch wouldbecome CEO of the new group and Itai Frieberger, current 888boss, CEO of Digital and the deal would result in 100 millionpounds in savings a year from lower third party fees, reduced ITspending and consolidation of central costs.
If the proposed three-way deal goes ahead, 888 and Rank saidthey would first merge, with Rank shareholders getting 1.086 new888 shares for each share held.
SHAREHOLDERS ON BOARD
The duo said execution risk was "substantially" mitigated bysupport for the proposal from 888's Principal ShareholderTrusts, who hold in aggregate 50.7 percent of the group andRank's largest shareholder, Malaysia's Guoco Group,which holds in aggregate 56.1 percent of Rank.
Guoco is the Hong Kong based investment company of Malaysianbillionaire Quek Leng Chan who controls Hong Leong FinancialGroup Bhd.
Rank and 888 have offered to buy William Hill for 199 pencein cash and 0.725 new 888 shares, valuing it at 364 pence ashare based on the closing price of 888 on Aug. 5.
"The combination of 888 and Rank and the acquisition ofWilliam Hill will be inter-conditional," they said.
Rank and 888 said that they expected high cash generation bythe combined group to result in rapid deleveraging and a netdebt to EBITDA (earnings before interest, tax, depreciation andamortisation) ratio of between 2.5 and 3 times in 2018.
They also anticipate a dividend payout ratio of 40 percent.
Rank shares closed down 1.6 percent at 207.7 pence onTuesday, while 888 was 1 percent lower at 217 pence and WilliamHill's stock fell 1.4 percent to 324.5 pence.
(Editing by Susan Fenton and Alexander Smith)
