"Rank-888 might not be the best possible combination for William Hill"

Expert Ken Odeluga has over 15 years of experience analyzing the global financial market. In an exclusive interview with Yogonet International, he said the Rank-888 consortium move might not be “the best possible combination” for William Hill.

News have come about Rank Group and 888 considering a potential takeover of William Hill. What is your opinion about that?

Just to be absolutely clear, what we have today is not news of a merger, it is news of a potential offer for William Hill by 888 Holdings jointly with Rank Group. 

As far as we know, there has been an offer but it is very difficult to tell much more because many of the details remain sketchy. Even the price, about 3.6 billion dollars, has not been confirmed by either of the parties. It looks like it has just come from a news report quoting insiders so there is not necessarily any corroboration of that.  However, we do know that there is a potential offer on the table, yes.

How do you analyze the current situation in William Hill following news last week that James Henderson was leaving the company and, now, a potential merger between these two gaming groups?

I’m not necessarily so keen on the particular deal that the parties have put on the table. That is, I am not sure that the best possible combination would be Rank combined with 888 Holdings and William Hill.

This is because William Hill is probably the largest browsing UK bookmaker, and so if it was to try and merge with a much larger or similarly large bookmaking group whose core business was bookmaking, it would likely run into competition concerns.

The best option would be for a combination that would allow William Hill to enhance and also expand its online offering. It is the online side which is William Hill’s weakest side at the moment, and indeed its online sales fell 11 percent last year, probably the most among bookmakers of its size.

What William Hill needs is a strategy that suits up its internet business and expands it. I doubt that a combination of 888 Holdings and Rank is the best way to bring that about.

What about the other mergers in the industry? Paddy Power/Betfair and Ladbrokes/Coral

The industry has been ripe for consolidation mostly because regulation has been forcing many of the larger players into smaller and smaller corners incrementally year by year with the internet shaving off margins for the larger players year by year. Gambling behaviour transitions moved toward the internet and operating margins are falling.

The larger players are starting to see their operating margins and their revenues backsliding at betting at shops. What the Paddy Power and Betfair merger was trying to do was consolidate, lower financing costs, and offer the chance for expansion.

The problem with William Hill was that it has been left behind at this point. William Hill most memorably failed in a bid to buy 888 Holdings itself last year. Basically, William Hill lost out on the wave of consolidation that hit the sector and that is why it is in the position it is today. It is not the worst in its sector in terms of its finances; in fact, it is among the better financed groups within the sector. The problem is, looking forward, its prospects don't look as attractive as those of Ladbrokes, Betfair and Paddy Power because it is going to face a situation where its growth is going to slow down and it won't be able to expand or increase revenues with the help of expansion on the online side as fast as Betfair, Paddy Power or Ladbrokes. That is why it is in the situation it is now and why some sort of deal really needs to happen.