Bookmaker William Hill is reported to have run into further difficulties with its Playtech joint venture, the engine of its rapid online growth. And to protect its online growth prospects, Hill's management is going to have to act decisively sooner rather than later on the future of the joint venture, and this could end up costing the business a handsome sum.
Often, conflicting corporate cultures undermine the original logic of joint ventures and acrimony generally ensues. But, operationally at least, William Hill's joint-venture with Playtech to run the bookmaker's online operation has been a huge success; double-digit sales growth over the past three years has established William Hill as one of the UK's biggest online brands.
But a poor working relationship between the two partners - who have lost few opportunities to air their disputes in either the courts or to the press - means that serious attempts are now being made to value William Hill online, which could ultimately determine the cost of taking complete control.
Well publicised problems at the joint venture's operations in Israel last year do not appear to have been fully resolved and a widely reported meeting later this month between the power brokers at Playtech and William Hill will attempt to thrash out the differences over the joint-venture. William Hill chafes at Playtech's veto over acquisitions - the deal for mobile betting company Probablity fell through because of this - while Playtech cannot talk to William Hill's rivals about software collaborations without the threat of a lawsuit.
Resolving the impasse is in everyone's interest and a right to buy clause for William Hill kicks in next year, which might be the best solution. City analysts reckon that William Hill will need to pay about 7 times earnings for Playtech's share of the venture, which puts the valuation at a minimum level of £269m. There may also be a premium to reckon with, but considering the company could comfortably double its net debt to £600m without stretching the balance sheet, funding a buyout at this level should not be a problem.
