Shares respond with an increase in early trading.
William Hill secures deal with Eldorado casino giant
- The FTSE-250 bookmaker is set to push further into US with Eldorado venture
- Shares responded positively to the news today with a 4% rise in early trading
- We reduced the stock from a ‘buy’ last month and continue to recommend it as a ‘hold’
William Hill today announced a partnership with US casino group Eldorado Resorts. The deal covers digital and retail sports betting, including an online casino, and will give the UK bookmaker access to Eldorado’s 23m customer base across 13 states.
In return Eldorado will receive $50m in William Hill stock, equivalent to 1.6% of its market cap, but subject to a 3-5 year lock-up. The deal follows the US Supreme Court’s decision in May to overturn a federal ban on sports betting which has led other UK bookmaking groups such as GVC to look at ways of exploiting the huge potential of the US sports betting market.
This deal is clearly good news for William Hill and the shares responded today with a 4% rise in early trading. That is a welcome boost given that they have underperformed the market this year, but with several large betting groups now jostling for position in the US market investors will want to see tangible results from the deal.
William Hill has already had some success in the US but the shares have been hit by the outcome of the UK government’s Triennial review which dramatically reduced the maximum stake allowed on fixed odds betting terminals in Britain. The company believes that will reduce its gaming revenue by 35-45% and operating profit by £70m-100m so the shares are no better than a hold.
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