RE: CZRS Bid Article by WMH SHAREHOLDER30 Mar 2021 10:13
Two hedge funds have accused the board of William Hill of failing to disclose information about the bookmaker’s takeover by the casino group Caesars as they push for shareholders to have a second vote on the deal.
GWM Asset Management and HBK Capital Management have written to the bookmaker’s board ahead of a court hearing to approve the deal on Wednesday. They argued that shareholders did not have enough information to approve William Hill’s £2.9bn takeover by Caesars when it was voted on in November.
GWM, which revealed its intention to contest the takeover on Monday, said in a letter seen by the Financial Times that the board had failed to disclose “potentially material” information about Caesars’ ability to terminate its joint venture with William Hill in the US should another acquirer attempt to buy the UK bookmaker.
The hedge fund said that had this been revealed to shareholders, it may have voted differently and that it also prevented a possible auction for the company that could have resulted in it selling for a higher price.
Since the deal, which values William Hill at 272p per share, was agreed, gambling stocks have risen due to the fast growth of the US market and an uptick in online gambling during lockdowns.
The US is seen as one of the fastest-growing and most valuable gambling markets in the world after a Supreme Court ruling allowed states to legalise sports betting in 2018.
Last week HBK, which has a 10 per cent exposure to William Hill, sent a public letter to the board arguing that it had “led the market to believe that no rival bid for William Hill would ever be possible”.
GWM has exposure to just over 1 per cent of William Hill shares through derivative trades, but said it wanted to contest the deal on the grounds that it was “contrary to the spirit of the UK takeover code”.
William Hill revealed in September that it had been subject to a bidding war between Las Vegas-based Caesars and the private equity group Apollo Global Management. Caesars was able to cut its US joint venture with William Hill should the bookmaker be bought by one of a list of “restricted acquirers” that Caesars could decide.
According to HBK, William Hill did not disclose until the day of the shareholder vote that Caesars could in fact only add six names to the list and that it could substitute just one of those names every six months.
William Hill declined to comment. However, in a letter from its chair Roger Devlin to GWM, it said that “provisions of these type [sic] are commonplace in joint venture arrangements (and accordingly well understood by the market)” and that the board rejected any suggestion that the list had been used by Caesars as a “poison pill”.
Tyler Tebbs, co-head of event-driven equities at Louis Capital, said while the hedge funds were protecting their position, the wider corporate governance perspective was significant.
“The board should have disclosed that Caesars only has the ability to throw
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