position” in two potentially lucrative countries. “I think it made absolute strategic sense for William Hill to do a deal like that. While the business is solid, where they want to go is where Paddy Power is – with 20% of revenues from retail and 80% from online. To do that they’ve got to buy; you can only grow in the core UK market for so long.” The positive sentiment surrounding December’s deal wasn’t shared by all. Some analysts pointed to the fact that Hills turned down the chance to acquire Centrebet in May 2010 before it was sold to Sportingbet itself for £130m last year, a deal which appeared strategically compelling at the time and proved to be even more successful than expected. Sportingbet has since claimed a 21% market share in Australian ?xed odds online sports betting, leading to a 93% year-on-year rise in net gaming revenues from the country. Had it gone through with the Centrebet purchase, Hills’ move into Australian territory would have arguably been signi?cantly less expensive. Ivor Jones, analyst with Numis, branded the 55p a share price met in the deal as “unacceptable” and for a long time insisted on a top target price of 90p for Sportingbet. “This is the wrong time to sell the business and William Hill/GVC are the wrong buyers,” he said. “We believe shareholders should vote against the scheme and encourage the board to conduct a proper auction at the proper time.” Jones also claimed that Sportingbet would’ve been better off selling to an Australian business which could have achieved greater synergies than Hills in the country. “Every £5m of synergies valued on 10 times would be worth circa 5p per Sportingbet share. We believe Sportingbet Australia would be worth more to a bidder which could extract synergies.” prospect with Ladbrokes holding takeover talks before walking away from a deal in late 2011. The major conundrum for Lads and others taking a close look at the operator, however, was that a large percentage of its revenues were, prior to its Centrebet takeover, generated in grey markets. In a strategic masterstroke by CEO Ralph Topping, Hills solved that dilemma by bringing GVC into the deal in order to siphon off those “unwanted” business segments. Hills has acquired Sportingbet’s Miapuesta brand which ranks as one of the top three sportbooks in Spain along with bwin.party and market leader Bet365, again allowing it to achieve critical mass in the country much faster than it could have hoped with its own brand. It has a call option to acquire Miapuesta’s customer lists in six months. According to one source, the delay in completing this element of the deal is due to structural reasons – Miapuesta sits on the same platform as other European Sportingbet businesses including Turkey, so time is needed for data migration before completing the transaction. Nick Batram, leisure and gaming analyst with Peel Hunt, says Hills may have paid “a bit of a premium” for Sportingbet’s assets, but has “signi?cantly accelerated the time it will take to get a strong market Lads on tour Another deal, and one whic h has been met with more puzzled reactions, is Ladbrokes’ move to acquire exchange wagering operator Betdaq for a sum thought to be in the region of £30m. Betdaq, owned by Celtic Football Club majority shareholder Dermot Desmond, who also holds a 2% stake in Ladbrokes, was launched in 2000 and operates a B2B service and a B2C product. The ?rm, which has a share of less than 10% of an exchange betting market dominated by Betfair, is reported to be operating at a loss. The admission from Ladbrokes in January that it is in discussions to buy Betdaq came a year after the pair were in talks over a supplier deal designed to bolster the operator’s underperforming online division. Pressure has been mounting on CEO Richard Glynn to rely less on established retail revenues to improve and bolster the operator’s online division, which has suffered from poor sportsbook margins and delays in overhauling its sportsbook and in rolling out a mobile platform. In the absence of a compelling online platform to cross-sell sportsbook customers into higher margin casino products, H1 2012 saw operating pro?t at the operator’s online arm fall by almost 50% to £15m (see page 30 for more on Ladbrokes).
Ralph Topping William Hill CEO
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