William Hill rejects Rank and 888's £3.16bn bid
Bookmaker William Hill has rejected a £3.16bn takeover offer from online operator 888 and casino giant Rank.
The bid, in shares and cash, was called "highly opportunistic" by Gareth Davis, chairman of William Hill, who said it did not reflect its true value.
The deal would create the UK's third-largest online betting group with revenues of £2.7bn.
William Hill shares have risen 22% to 334p since 888 said last month that it was considering a joint bid with Rank.
The bid would mean 888 taking over Rank, with the newly formed company then buying William Hill.
Mr Davis said that it would involve some £2.2bn in debt. He said: "It is a very complex three-way combination at a low premium involving substantial risk for William Hill shareholders: execution risk, integration risk and risks of materially increased leverage."
The offer of 364p a share to William Hill shareholders is made up of 199p in cash and 0.725% per share in the new company, BidCo.
But Rank and 888 argue that its business plan would increase the company's value to up to 408p a share - or £3.6bn.
888 and Rank said that they see "significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies, and from the anticipated benefits of economies of scale which will accrue to all shareholders."
William Hill said that it was already seeing a turnaround in its own online business, and while a merger would give it access to 888's offshore markets it replied that it was already seeing growth of 12% in its Australia operation and 49% in operating profits in the US.
William Hill tried and failed to acquire 888 in a £700m offer last year.
John Colley, a Professor of Practice at Warwick Business School said the bid "looks particularly opportunist as William Hill have lost their chief executive James Henderson after two years of disappointing performance with the shares at a lowly 336p compared with the 364p offer.
"However William Hill is now in play and others may be along with improved offers and more cash.
"The industry is consolidating rapidly and William Hill, Rank and 888 will be part of that one way or another. For this reason, Rank and 888 should also watch out."
Other mergers in the industry include Ladbrokes and Coral signing a £2.3bn merger in July and Paddy Power and Betfair joining forces in September.
Earlier this month William Hill reported a 1% rise in revenues in the first half of the year, saying that strong demand during the Euros football tournament had offset poor online sales and what it called "the worst Cheltenham results in recent history".