* William Hill received revised 888-Rank proposal on Sunday
* Says proposal substantially undervalues company
* 888-Rank consortium must 'put up or shut up' by August 21
* William Hill shares down 3 pct (Adds line from 888/Rank on revised offer's valuation)
LONDON, Aug 15 (Reuters) - British bookmaker William Hill rejected a revised takeover proposal from rivals 888Holdings and Rank Group on Monday, saying itcontinued to see no merit in engaging with the consortium.
Casinos and bingo halls operator Rank and online gamblinggroup 888 want to join up with William Hill to create Britain'slargest multi-channel gambling operator by revenue and profit.They say a combination will result in cost savings of 100million pounds ($129 million) a year.
However, William Hill spurned the consortium's initial 3.16billion-pound ($4.1 billion) cash-and-shares proposal lastTuesday, saying it "substantially undervalued" the business.
It said a revised proposal was received on Sunday,comprising the same 199 pence per share in cash but 0.86 newshares in the bidding company instead of the 0.725 sharespreviously offered, which would result in William Hillshareholders owning 48.8 percent of the combined group, up from44.6 percent under the original proposal.
William Hill said that with the exception of the change toits shareholders' proposed ownership of the combined group, noneof the other key terms of the revised proposal had changed fromthe original approach.
It said that based on the combined market capitalisation ofthe three companies on July 22, adjusted for the cash componentof the revised proposal and before any synergy benefits, theoffer equated to an estimated value of 352 pence per share - apremium of 12 percent.
It said the consortium's previous proposal had an estimatedvalue of 339 pence per share. July 22 was the last trading dayprior to the announcement of a possible offer by the consortium.
"This revised proposal continues to substantially undervaluethe company and the cash element of the proposal has notchanged. Therefore, the board sees no merit in engaging," saidWilliam Hill Chairman Gareth Davis.
"This latest proposal moves nothing forward - I can't engagein something based on risk, debt and hope," he said.
The consortium said the revised proposal was worth 394 pencea share to William Hill shareholders.
However, that valuation was based on the closing share priceof 888 shares on August 5 - the last trading day prior to theconsortium's submission of the original proposal.
Shares in William Hill were down 3.1 percent at 323.8 penceat 0858 GMT, which analysts said indicated investors wereunimpressed by the latest proposal.
Under UK takeover rules the consortium has until August 21to either announce a firm intention to make an offer or walkaway.($1 = 0.7735 pounds) (Reporting by James Davey; editing by Kate Holton, GregMahlich)