July 25 2016 saw the latest move towards consolidation in the UK gambling industry as online bookmaker 888 Holdings Plc (888) and casino operator The Rank Group Plc (Rank) approached longtime incumbent William Hill Plc (William Hill) about a potential merger. The merger would create one of the largest gambling groups in the world and the share prices of all three protagonists responded well to the announcement. UK takeover rules dictate that 888 and Rank now have until August 21 2016 to submit a formal offer.
This is somewhat of a reversal for William Hill, which last year failed in an attempt to acquire 888 after its £720m offer was deemed too low. The new merger proposal comes less than a week after James Henderson stepped down as CEO of William Hill after failing to reverse the decline in the firm’s online business. Shares in William Hill rallied on the news, increasing by 7%, although the price is still languishing 15% down from the start of 2016.
William Hill has struggled recently, particularly with regards to its online and mobile offerings, which have been key growth areas for the industry as a whole, and the company was forced to issue a profit warning in March citing a poor Cheltenham Festival and increasing customer “time-outs”. There has also been a widespread backlash in the media against fixed-odds betting terminals in high street betting shops as these are seen as highly addictive. The government has been under pressure to increase the regulation of these machines which could potentially affect high street bookmakers’ lucrative cash-cow.
These trends have been the driving force behind the current wave of M&A’s in the UK gambling industry, and greater consolidation is likely to increase rivalry in the market, as the newly formed gambling behemoths battle it out for supremacy.
Such mergers will only increase the rivalry within the sector, particularly in the high-growth online sector, where the likes of William Hill will be attempting to rival online-only operations such as Betfair in a fight for customers and revenue as the revolution of the UK gambling industry continues apace.