William Hill is moving higher after a buy note and speculation it could be close to a deal to take full control of its online business.
Joint venture partner Playtech, which develops software platforms for gaming businesses, owns 29% of William Hill Online, and the two sides have had a fractious relationship over the years. William Hill has until November to exercise an option to buy back the Playtech stake, and in its last results statement in July, it said:
In the fourth quarter the group will have the opportunity to commence a process [to buy the Playtech stake] through the first of two contractual call options.
Our chairman and chief executive continue to meet regularly with their counterparts [at] Playtech ahead of this. Discussions have been amicable and continue.
Analyst Simon French at Panmure Gordon pointed to suggestions that William Hill was considering a retail bond offering, which could be used to fund a buyout of the 29% shareholding. He said this would heighten speculation a deal was near.
William Hill would need to pay £369m on his calculations, but Playtech also has the option to take a 10% stake in William Hill itself as part of any deal.
In a buy note with a 350p price target - based on an upgrade to his forecasts following better than expected half year figures - he said:
We estimate [buying the stake] would increase pretax profits by around 3% on a pro-forma basis in an all cash deal although Playtech has the option to take up to 10% of William Hill shares as part of the consideration.
Given Playtech's difficulty in spending the funds it raised in November 2011, that could yet prove to be an appealing option.
William Hill is 1.8p higher at 306.8p while Playtech is down 0.5p at 395.5p. There have also been suggestions in the market that Playtech could be interested in buying 888, up 5.75p at 92.75p, which is roughly the same size as the amount Playtech could get from selling the William Hill online stake.
