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Oct 14, 2016

What Would a PokerStars, William Hill Merger Look Like?

By RTR Dennis

665x200 oct16 pstars whill merger

The big news in gaming this month is the merger talks between Canada’s Amaya Gaming and British bookmaker William Hill.

Amaya, owner of PokerStars, are currently valued at £2.1 billion ($2.6bn) while William Hill are worth £2.7 ($3.3bn).

If the companies do indeed merger, they would create an online gaming superpower worth almost £4.8bn ($5.9bn).

If this union happens as planned, what will be the implications for both companies and the industry? Find out as we discuss several things to expect from this merger.

William Hill Would Take on Significant Risk with Amaya’s Debt

If this merger doesn’t happen, one of the biggest reasons why will be because William Hill couldn’t convince shareholders that it’s a good idea to take on Amaya’s heavy debt.

Ivor Jones, who works at corporate trading advisor Peel Hunt, believes that Amaya’s debt is 4.8 times the company’s annual earnings. If the companies merger, this ratio would fall to 3.5 times earnings, but that’s still high when compared to the industry.

Amaya Will Expand William Hill’s Horizons

Most of William Hill’s business is concentrated in the UK, but Amaya gives them an opportunity to expand into more international markets.

PokerStars commands 70 percent of the world’s online poker traffic, and they feature 2.26 million quarterly active users, along with over 100 million total customers across the world. Amaya’s 2015 revenue was £1.04 billion ($1.3bn), with much of this coming from poker.

William Hill Will Operate in More Unregulated Markets

An established and well-respected name in the UK betting industry, William Hill generate less than 5 percent of their business from unregulated markets. If they were to combine with PokerStars, that figure would rise significantly to about 25 percent.

Amaya have taken PokerStars into more regulated markets since buying the company in 2014. But they still don’t generated nearly as much regulated business as William Hill.

Amaya Would Quickly Expand Outside of Poker

While PokerStars dominate the internet poker world, Amaya have spent the last year-plus trying to expand into casino gaming and sports betting. They’ve had marginal success with casino gaming, but their sports betting and daily fantasy sports haven’t performed so well.

Linking up with William Hill – a giant bookmaker – would immediately give Amaya access to more customers. Additionally, the new company would better be able to cross-sell its platforms across poker, casino, and sports betting.

William Hill Would Trump GVC and Keep Up with Rivals Merging

William Hill aren’t alone in their pursuit of Amaya. Rival GVC Holdings, which owns bwin.party and SportingBet, also have their eyes on buying the Canadian company. So it’s even more imperative to William Hill that they gain control of Amaya and outdo their rivals.

Another impact here is that the London-based bookmaker would keep up with the big mergers that other gaming companies have made. Ladbrokes and Coral completed a £2bn merger in 2015, while Betfair and Paddy Power recently completed an £8bn union.

The Companies Would Save Money

If Amaya and William Hill do become one, they’ll cut a combined £100 million in annual operating costs. This isn’t as important to the deal as cross-selling and international expansion, but
it’s still a significant amount of money that both business would save under a merger.

Will the PokerStars, William Hill Merger Be Completed?

It’s certainly not a given that we’ll see PokerStars and William Hill combine in the near future. Questionable factors include Amaya’s presence in unregulated markets and their debt.

But on the other hand, William Hill have been struggling over the last year and they’d like to form a meaningful merger. Amaya may not have been their first choice, but it presents the most-attractive offer at this time.