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William Hill acquires Swedish operator

The gambling company wants to diversify away from the UK high street and betting shops
October 31, 2018

Tighter regulation in the UK gambling market has encouraged several companies to seek growth opportunities overseas. The proposed acquisition of Swedish operator Mr Green & Co by William Hill (WMH) is the bookie’s latest effort to diversify revenues, both by geography and channel.  

IC TIP: Buy at 217p

Mr Green is a digital gaming group operating across 13 markets under brands including Mr Green and Redbet, with licences in Denmark, Italy, Latvia, Malta, the UK and Ireland; it expects to add a Swedish licence by the year-end. The SKr2.82bn (£240m) total purchase value, or SKr69 per share, represents a 48.5 per cent premium to Mr Green’s closing price the day before announcement. The deal values Mr Green, based on £6m-worth of expected synergies, at 7.7 times enterprise value to cash profits on a FY2019 pro-forma basis. Analysts at Goodbody expect the acquisition to add a maximum of 11 per cent to FY2020 cash profits and 6 per cent to earnings per share (EPS).

The deal may seem like a departure from the recent strategy of building market share in the newly liberated US sports betting market, but it still marks a move away from betting shops on the UK high street. Following the transaction, William Hill’s proportion of international revenue will increase from 14 per cent to 21 per cent, while the online percentage will rise from 42 per cent to 47 per cent. Mr Green mainly offers gaming and casino products, but has a fast-growing sportsbook division too, which could complement William Hill’s expansion into the US sports betting market.