Corporate By William Hill PLC

William Hill PLC - William Hill acquires affiliates of playtech LTD

William Hill PLC acquires affiliates of Playtech Ltd and other assets and enters into online gaming licence agreement with Playtech Ltd

Transaction Summary

Combination of William Hill PLC's online operations ('William Hill Interactive') and certain affiliates of Playtech Ltd ('Playtech') and other assets ('the Purchased Assets') to create the leading European online gaming and sports betting business ('William Hill Online')

  • Pro forma estimated 2008 net revenues of £190 million and EBITA of £75 million

  • William Hill PLC ('William Hill') will have a 71% controlling interest in William Hill Online, based on relative contribution to EBITA

  • William Hill has an option to acquire Playtech's interest on an independent fair value basis, exercisable after four and six years

  • William Hill Online has entered into a software agreement with Playtech for a minimum of five years for poker and casino, with an option to move into other product areas

Two highly complementary businesses:

  • William Hill Interactive brings strength of brand, sports betting expertise and established UK customers and profits

  • The Purchased Assets bring online marketing and customer retention expertise, an extensive affiliate network and established European customers and profits. In addition, the employees of the Purchased Assets have experience and knowledge of operating the Playtech gaming software

William Hill Online will be the leading European online gaming and sports betting operation with:

  • Significant European presence

  • Greater focus on online gaming

  • Use of Playtech software for poker and casino, and Orbis for sports betting, creating a stronger and more consolidated platform for growth

Transformational step, consistent with William Hill's stated strategy to increase online gaming and international earnings. William Hill Online will be:

  • The leading European online gaming and sports betting business

  • The clear leader in online gaming and sports betting amongst UK land based gaming and betting operators

  • Well positioned to accelerate online revenue and profit growth in the UK and across Europe

Generates significant shareholder value and enhanced growth prospects for William Hill whilst requiring only limited upfront cash

  • Earnings positive in year one and significantly accretive thereafter (1)

Commenting on the transaction, Ralph Topping, CEO of William Hill PLC, said:

"This transaction is a transformational step for William Hill consistent with our stated strategy to increase online gaming and international earnings. William Hill Online will be the leading European online gaming and sports betting business and the clear online leader amongst UK land based gaming and betting operators.

The transaction generates significant shareholder value and enhanced growth prospects for William Hill."

William Hill PLC acquires affiliates of Playtech Ltd and other assets and enters into online gaming licence agreement with Playtech Ltd

William Hill, one of the leading providers of fixed odds bookmaking services in the UK, today announces the acquisition of assets, businesses and contracts comprising an affiliate marketing business, customer services operation and gaming brands and websites, from Playtech, the AIM listed online gaming software provider. As part of the transaction the newly created William Hill Online has also entered into a contract with Playtech for a minimum of five years for the provision of online gaming software for poker and casino, with an option to move into other product areas.

The transaction combines two highly complementary businesses. William Hill Interactive brings strength of brand, sports betting expertise and an established UK customer base and profit stream. The Purchased Assets bring online marketing and customer retention expertise, an extensive affiliate network and an established European customer base and profit stream. In addition, access to Playtech's software network is expected to provide greater liquidity for poker and lead to increased customer retention, customer reactivation and player lifetime values. The Orbis platform, which will be used for the sports betting business, remains on track for implementation in late November 2008.

William Hill Online will benefit from both applying the active marketing techniques of the Purchased Assets to the William Hill brand and offering their products to the existing William Hill customer base, as well as offering the William Hill brand and sports betting to the existing customer base of the Purchased Assets.

The transaction is consistent with William Hill's stated strategy to increase online gaming and international earnings. William Hill Online will have significant European presence, greater focus on online gaming and enhanced online growth potential. William Hill Online will become the leading European online gaming and sports betting operation and the clear leader in online gaming and sports betting amongst UK land based gaming and betting operators. William Hill Online will be well positioned to accelerate online revenue and profit growth in the UK and across Europe.

William Hill will control and operate William Hill Online, which will remain a consolidated subsidiary, with Playtech's share of profits shown as a minority interest. Playtech is acquiring various online gaming businesses, marketing assets and contracts for a total consideration of up to $250 million in cash as part of the transaction, the majority of which represent the Purchased Assets. As consideration for the Purchased Assets, Playtech will receive a 29% interest in William Hill Online, with William Hill owning 71%. Playtech's ownership interest in William Hill Online can increase from 29% to 32% depending on certain conditions relating to the integration. William Hill has an option to acquire Playtech's interest on an independent fair value basis, exercisable after four and six years. Playtech has the right to receive a portion of the option proceeds in William Hill shares, not exceeding 10% of William Hill's outstanding share capital at the time of issue.

For the six months ended 1 July 2008, William Hill Interactive generated net revenues of £68 million and EBITA before exceptionals of £28 million. For the same period, the Purchased Assets generated net revenues of £26 million and pro forma EBITA of £8 million. On a pro forma basis for the year ending 31 December 2008, William Hill Online is expected to generate net revenues of £190 million and EBITA of £75 million. Net revenues are targeted to grow by more than 50% between 2008 and 2010. In 2009, focus will be on net revenue growth with margins maintained. In 2010, focus will be on continued net revenue growth and improving margins.

The transaction is expected to require limited upfront cash with capital expenditure, transaction costs and integration costs of approximately £24 million.

The transaction is expected to be earnings positive for the William Hill in the first full year of ownership and significantly accretive thereafter.(1)

William Hill has appointed Henry Birch as CEO of William Hill Online, effective immediately. Henry Birch was previously Chief Executive of Leisure & Gaming PLC. William Hill Online will draw on the strengths of the management team of both sides with Eyal Sanoff as Chief Marketing Officer, Peter Marcus as Chief Operating Officer and the finance and legal functions being provided by William Hill.

Transaction is expected to complete in full in January 2009. Integration is expected to be achieved within 6-9 months of completion.

There will be a presentation to analysts at 09:30 am today at The Lincoln Centre, 18 Lincoln's Inn Field, London WC2.

A live webcast of the presentation will be available online at www.williamhillplc.co.uk. The recorded webcast of the presentation and a copy of the accompanying slides will also be available on our website later in the day. It will be possible to listen to the presentation by dialling +44 845 634 0041 (International: +44 208 817 9301) using the conference code 1431775#. The presentation will be recorded and will be available for a period of two weeks by dialling +44 207 769 6425 (International: +353 1436 4267) using conference code 1431775#.

Enquiries:

William Hill PLC:
Ralph Topping, Chief Executive
Simon Lane, Group Finance Director
+44 020 8918 3910

Citi: (financial advisor and corporate broker to William Hill PLC)
Jan Skarbek
Steve Salo
Andrew Seaton (Corporate Broking)

+44 020 7986 4000

Brunswick:
Fiona Antcliffe
James Clasper

+44 020 7404 5959

Notes to Editors

William Hill and William Hill Interactive

Founded in 1934, William Hill is one of the leading providers of fixed odds bookmaking services, offering odds and taking bets on a wide range of sporting and other events, as well as offering gaming machines in licensed betting offices and operating online casino, poker and games sites as well as two greyhound stadia. It is a market leader in all major betting channels in the UK with an established international presence through its online business.

For the year to 31 December 2007, William Hill Interactive generated net revenues of £120 million and EBITA before exceptionals of £51 million. For the six months ended 1 July 2008, William Hill Interactive generated net revenues of £68 million and EBITA before exceptionals of £28 million and as at 1 July 2008 had gross assets of £122 million.

Website: www.williamhillplc.co.uk

Playtech 

Playtech develops unified software platforms for the online and land based gambling industry, primarily targeting existing online operators wanting to upgrade their system; sportsbooks looking to diversify and land-based operators making their online debut. Playtech gaming applications - online casino, poker, bingo, mobile gaming, live gaming, land-based kiosk networks and fixed-odds games - are fully inter-compatible and can be freely incorporated as stand-alone applications, accessed and funded by players through the same user account and managed by the operator by means of a single powerful management interface. Founded in 1999, Playtech has over 750 personnel distributed globally, around seventy five percent of whom are engaged in research and development of current and future gaming technologies. 

Website: www.playtech.com

The Purchased Assets

The Purchased Assets are the assets, but not the liabilities, of certain affiliates of Playtech and other marketing and gaming assets, contracts and brands providing vertically integrated services to the European online gaming marketplace. Playtech is acquiring various online gaming businesses, marketing assets and contracts for a total consideration of up to $250 million in cash as part of the transaction, the majority of which represent the Purchased Assets.

For the year to 31 December 2007, the Purchased Assets generated net revenues of £31 million and pro forma EBITA of £6 million. For the six months ended 30 June 2008, the Purchased Assets generated net revenues of £26 million and pro forma EBITA of £8 million and as at 31 December 2007 the pro forma gross assets of the Purchased Assets was £44 million.

Henry Birch

Henry Birch is 39 years old and started his career in politics and lobbying before moving to Turner Broadcasting (and subsequently Time Warner), where he helped launch their TV and other media properties throughout Europe. Subsequent to this, Henry was business development director for a Bertelsmann digital music venture in Silicon Valley before moving back to the UK in 2001 to join BettingCorp, a developer and operator of betting and gaming services. As Chief Operating Officer of BettingCorp he launched two interactive TV betting services, as well as managing their online gaming interests, and led the sale of BettingCorp to Liberty Media and Open TV in August 2003. Henry was one of the founders of Leisure & Gaming, a holding company focused on the online betting and gaming sector trading on AIM, and was Chief Executive from 2006 until July 2008. Henry holds an MA from Edinburgh University and an MBA from Stanford Business School.

(1) The statement as to earnings per share enhancement relates to profits before amortisation and exceptional items and does not constitute a profit forecast and should not be interpreted to mean that William Hill's future earnings per share will necessarily exceed or match those of any prior year

This announcement includes certain forward looking statements that identify expectations of future events or results. All statements based on future expectations rather than historical facts are forward looking statements that involve a number of risks and uncertainties and William Hill PLC cannot give assurance that such statements will prove to be correct.