A Hill to Climb: Two Hedge Fund Investors to Dispute Caesars’ William Hill Takeover
Billion-dollar-plus hedge funds GWM Asset Management and HBK Capital Management sent a letter to William Hill’s board with the aim of torpedoing the £2.9 billion (almost $4 billion) takeover bid from US casino giant Caesars.
We first reported on a potential merger between UK gambling giant William Hill and US casino mainstay Caesars back in September 2020.
The two companies have been working together in the US market for a few years. Caesars then bought Eldorado Resorts, which had a pre-existing contract with William Hill that Caesars continued.
This relationship almost brought them to the point of a merger in 2019, but Caesars dropped out at the last minute.
In the two years since, the boards of both companies have recommended the merger go ahead – and it’s looking likely.
But there’s one possible stumbling block before the completion of the £2.9 billion deal.
Potentially Material Information
Hedge fund investment companies GWM Asset Management and HBK Capital Management, who own about 11% of William Hill’s shares between them, claim that Caesars held William Hill executives over a barrel because of their US contracts.
The letter claims that Caesars told William Hill to reject bids from certain rivals on the grounds that their US contracts (worth hundreds of millions of dollars a year) could be terminated if one was accepted.
“Caesars’ actions led the market to believe that no rival bid for William Hill would ever be possible”HBK Capital Management
Not in Spirit
There’s no proof of this collusion just yet—and no proof that such actions would even break any law in the UK or US.
However, the fact that (despite interest from other groups such as Apollo Capital Management) Caesars’ current bid for William Hill is about $100 million below their 2019 bid is a little suspicious.
GWM Asset Management, who own a further 1% stake in William Hill, said that Caesars’ actions may not have broken any laws but were “contrary to the spirit of the UK takeover code.”
Caesars’ position will be strengthened by the fact it was open about its threats to cancel William Hill’s US contracts if they sold up to anyone else.
However, the hedge fund investors claim that this was a vague assertion and that there was a specific list of forbidden investors that Caesars drew up and presented to William Hill executives.
Both funds claim that, as shareholders, they would have voted differently had they seen this information before the vote to accept Caesars’ takeover bid.
This secret list is what their legal argument hedges on, so it will be interesting to see how the story develops if it goes to court.
Of William Hill’s largest other shareholders, billionaire Betfred owner Fred Done is “going to leave them to it” according to a source close to him spoken to by the UK’s Financial Times.
Other large shareholders in William Hill, such as Credit Suisse and Société Générale, refused to comment on the issue.
It is widely expected that Caesars will sell off the European parts of William Hill’s business if any deal does go ahead.
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