Just as the UK bookmakers are celebrating the liberalisation of sports betting in the US, others are speculating about them being acquired by foreign competition.
Roger Devlin, chairman of William Hill PLC (LON:WMH), has raised the spectre of the UK's bookies being taken over by foreign competition if the government takes a hard-line on fixed odds betting terminals (FOBTs) – the so-called “crack cocaine of gambling”.
READ: William Hill and Ladbrokes rally on regulator's better-than-feared proposal on FOBT stakes
In March, the UK's Gambling Commission recommended new restrictions on fixed-odds betting terminals that were less stringent than feared, suggesting that the maximum stake should be cut from the current level of £100 to £30.
That did not stop campaigners concerned about the social impact of FOBTs pressing for a reduction to a maximum stake size of £2, and many people expect Culture Secretary Matt Hancock to accede to the requests of the campaigners.
FOBT reforms 'will trigger William Hill bid', bosses warn https://t.co/NtS8XkOcPE pic.twitter.com/KIoTKUy4Uq
— UK Asset Company (@ukassetcompany) May 15, 2018
A reduction of the maximum stake would hit the bottom line of the bookmakers hard and would, according to Devlin, put the jobs of around 20,000 people at risk, including his own if his attempt to scare the politician into making a bookie-friendly decision is to be believed.
“Consolidation within our sector continues and I would also not want to see the impact of a disproportionate triennial outcome being a factor in the name of William Hill being added to the list of companies now in foreign ownership,” Devlin said in a letter to the Culture secretary.
Analysts at Credit Suisse expect William Hill and Ladbrokes earnings would be slashed by 40% and 50%, respectively, in the worst-case £2 scenario.
The Swiss bank also reckons around 1,000 betting shops could close down if the bookies' worst fears are realised.
William Hill is especially vulnerable to a takeover attempt as it is heavily reliant on FOBTs, so a hard-line decision could make it cheap, while it has also pinned a lot of its hopes of the liberalisation of gambling laws, which makes it an attractive proposition in view of the Supreme Court's decision to sanction the lifting of the ban on sports betting in the US.
READ: Webis and GAN soar after US Supreme Court opens door to the legalisation of sports betting in the US
According to Russ Mould, the prolific quote generator at wealth management firm AJ Bell, “Hills has a terrific foothold in the USA, helped by a trio of acquisitions it made in 2011”.
“The US Supreme Court’s decision to open up and legalise sports betting in the USA means William Hill has an excellent position in a potentially massive market since the company is already the leading regulated player in Nevada. That may put Hills in someone’s sights, especially as three of the Big Four of UK betting of the 1970s and 1980s – Ladbrokes, Corals and Mecca – are no longer independent and the new Big Four of Paddy Power, Bet365, GVC and Stars could leave Hills looking out-gunned, especially in the online market,” the investment director of AJ Bell suggested.
“The highly cash-generative business has had six different owners since the death of William Hill himself in 1971, starting with retail group Sears (1971), Grand Metropolitan (1988), Brent Walker (1989), Nomura (1997), a private equity consortium (1999) and then its shareholders after the 2002 flotation on the London Stock Exchange. It nearly found a seventh in 2016, only for a joint £3 billion bid from 888 and Rank to founder,” he noted.
Share prices of US casino operators surged after the Supreme Court's ruling was announced yesterday and it is possible that once they have conquered their home market, US bookies might look abroad to other regulated gambling markets for expansion possibilities.
The USA Today newspaper reported that in anticipation of the court’s decision, casino operators based in Nevada have taken steps to set up sports books in other states.
“Most of those that are operating in Las Vegas today are operating in other markets around the country,’’ the US daily quoted Geoff Freeman, the chief executive officer of the American Gaming Association, as saying.
“I can assure you that those companies are excited about the possibility of bringing their expertise into these other markets as they consider sports betting,” Freeman declared.