Joining forces: Ulrik Bengtsson and Per Norman talk Mr Green integration

The following article was written prior to the release of William Hill’s 2018 financial results

Ulrik Bengtsson’s arrival at William Hill last year no doubt raised eyebrows across the wider industry. What was Hills cooking? It may have appeared to many that the former CEO of a top 10 Power 50 operator was accepting something of a demotion in his newly-created role as chief digital officer at the UK bookmaking stalwart.

But within a year, Bengtsson has forged a team of trusted former and new colleagues to drive his vision to diversify William Hill’s revenues, update its digital offering and from what we now know, buy out renowned Nordics casino brand Mr Green (MRG) for £242m. It certainly appears Bengtsson has been afforded a high level of autonomy to shake up the operator’s well-established structures.

Bengtsson is no stranger to the European M&A scene having orchestrated a chain of smaller, but equally as strategic, acquisitions during his five-year stint at Betsson. Although some may have raised eyebrows back in the day, Bengtsson’s experience in the high-stakes game of chess that is online gambling M&A is vast and invaluable.

Speaking to EGR Intel at its London office on Bedford Avenue, Bengtsson acknowledges his biggest lesson from his time on the frontlines has been not to rush the acquisition process. To him, the board of directors at MRG, and of course the keen spectators among us, both parties appear to have struck gold on a deal that has the potential to be a success.

According to Swedish consultancy firm Mediavision, Mr Green was one of the top-five casino and race betting brands in Sweden in 2017, which means on Hills’ part the deal offers up a sizeable chunk of Sweden’s online market share without the operator having to do much of the hard work. Equally, Hills gains entry into Denmark, the Baltics and Austria, aiding the diversification of its 85% UK revenue split. Hills extending its reach beyond the UK is timely, and not without reason. As the operator revealed in November last year, it did not expect to return to “strong operating profit growth” in the market until 2020, despite strong underlying fundamentals.

At the time, Hills CEO Philip Bowcock said: “Adverse regulatory and tax changes will impact online profit growth in 2018 and 2019, including enhanced customer due diligence processes and an increase in remote gaming duty to 21%.”

Although the firm reported relative growth of 16% in Italy and Spain and 15% in other markets in H1 2018, the need to move elsewhere in Europe is certain as regulatory pressure in the UK increases. “You don’t want to be dependent on one regulated market,” Bengtsson insists. “What you see now is that regulation doesn’t necessarily protect you from other problems so in either case, whether it’s grey or regulated, you need to be diversified to balance all these things out.”

Other side of the coin

From MRG’s perspective, Hills’ immense scale will offer benefits that could well have been unobtainable organically, at least in the short term. MRG group CEO Per Norman underlines the potential for scale for Mr Green falling within the William Hill umbrella.

“MRG will be part of a much larger group which will be a perfect match with our geographical presence both in markets and offices, innovative products and strong brands in Mr Green and Redbet. We are convinced that size is a critical factor for future success and, with William Hill, we will be part of their global expansion and we will continue to invest in a world-class product,” says Norman.

Bengtsson and Norman share a similar career history, having both spent time in the senior management team at major Swedish entertainment company and broadcaster MTG before transitioning into the egaming world and, if this deal suggests anything, share very similar views on the direction of the industry.

Norman believes such industry consolidation will only continue as companies grapple with tougher regulatory demands. “Size will be of increasing importance going forward,” he says. “In addition, one must have strong brands and the resources to increase investments in unique products and compliance. They had a pretty healthy view of their position in the market and the need for scale over time,” Bengtsson says of Mr Green. “And they were very open to the challenges the industry is facing and reacted to an opportunity that made a lot of sense.”

Redeye analyst Kristoffer Lindstrom said in a note following the acquisition announcement that Mr Green was unlikely to receive a more competitive offer than this. “MRG is, when viewed in comparison to peers and our valuation range, priced at low levels,” he wrote.

“Still, the company holds one of the best new gambling brands in Europe and is a top-tier operator. A larger player wanting to expand their presence could possibly view MRG as an attractive acquisition target.” He estimates that the MRG deal will spark further attempts by UK operators to establish a position in the egaming hotbed that Sweden has become, with more deals to come.

Cunning plan

But was the Mr Green purchase always on the cards for Bengtsson in his vision for turning William Hill Online around? He adorns a knowing grin. “With the starting point of wanting to diversify internationally, growing organically was always going to be hard, so I think this was always necessary. I’ve known the guys from Mr Green for years and, given what we’ve done at Betsson, I felt I had a pretty good view of their markets and the strengths and weaknesses of the brands out there,” he relays.

The mechanics of the deal and the two parties’ long-term strategy is surprisingly straightforward. Bengtsson is adamant that any technical or operational integration between the two firms will be minimally disruptive. In essence, the Mr Green team will remain the Mr Green team and the only cross-over between staff, for now, will be the relocation of William Hill International staff to Mr Green’s headquarters in Malta, to afford the team better access to its European markets after Brexit comes into force.

And movements have already begun with new Hills International MD Patrick Jonker joining Mr Green’s Sliema-based office this month. Jonker is one of a handful of former Betsson staffers Bengtsson has coerced into joining the UK bookmaking behemoth.

“Jonker will run William Hill International, including the Spanish, Italian and rest of the world business,” Bengtsson notes. “Some of those people will start to move over into the Mr Green office with Patrick and it’s still to be decided how we weave Mr Green into that mix.”

William Hill regional manager Clemens Keiser has already relocated to the island and is reporting to Mr Green MD Magnus Alebo. Movement will continue in the coming months as Hills carries out its “light-touch” integration with MRG. “The plan is to do nothing in the short term, we want to run Mr Green as a standalone brand and company,” says Hills’ chief digital officer. Instead the focus is on establishing synergies in product and geographical markets.

No acquisition deal discussion is without the mention of synergies and between William Hill and Mr Green there are many. “[In cost synergies,] we said roughly £6m annually but on the revenue side we need to understand more what we can do in the various markets before we can have an opinion on that,” comments the William Hill CDO. “Obviously there are some revenue synergies and there is no doubt about that, but it hasn’t been part of the deal’s mechanics and calculations.”

Norman concurs: “What made the offer attractive to us is the fact that MRG complements William Hill very well both geographically and with our strong brands. However, there are obvious synergies through scale and increased purchasing power and dual stock market listings.”

Redeye’s Lindstrom had previously valued the SEK69 per share purchase price as too low in comparison to his base-case valuation of SEK77. Bengtsson agrees that the figure was extremely good value for money. “However, the real value won’t be determined for five years,” Bengtsson comments. “That’s the nature of an acquisition. The value of this needs to materialise over a long period.”

Battle of the brands

Bengtsson downplays any suggestion of Hills adopting a wider multi-brand approach as the MRG acquisition marks Hills’ first move into expanding its brand offering, not counting its brief entry into Australia. He insists it is not in his immediate strategy to continue to grow its brands, but rather leverage the current success of MRG’s products, including the recently acquired Evoke Gaming and Baltics-facing 11.lv brands.

Mr Green will maintain its brand identity and remain the leading brand in the William Hill catalogue within the jurisdictions it is strongest in, including Sweden, Denmark and Austria. While in the UK, Mr Green and its Evoke Gaming brands will complement Hills’ major presence.

“The roadmap is to really focus on the value. Where we can create more value by working together and using each other’s technology and platforms and skills, and not necessarily focusing so much on hard coding integrating and merging but picking out the pockets of value and capitalising on those,” he says.

Redbet in particular piqued Bengtsson’s interest, but he remains shtum on its long-term plan, only revealing that he believes it has huge potential “in one shape or another in a couple of its markets”. Despite the UK’s long-term potential becoming less and less valuable, Hills’ newly-acquired products will open the doors to an entirely new audience for the operator. As Bengtsson puts it, it will give Hills the license to talk to a completely different audience that “might not normally listen to William Hill’s traditional messages”.

Uniquely, the Mr Green brand is stronger than its UK market share and Bengtsson is eager to grow its presence in the UK, and alternately use certain aspects of Mr Green’s casino product on the UK William Hill Casino offering. Another area of product overlap is safer gambling, and MRG’s Green Gaming tool ties in closely with Hills’ ambitious Nobody Harmed campaign.

“Then when you start to look at the product level, what Mr Green has done more long term in the last 10 years is incredible. Together with a few others, it invented the modern casino experience so they are very strong in the gaming space and William Hill is strong in the sportsbook space, which is another very good skill overlap.”

Product-wise, Mr Green has been on the front-foot in recent months having pioneered the personalised live casino space with its interactive Live Beyond Live game as well as its safer gambling Green Gaming tool which won it the accolade for Socially Responsible Operator at the January EGR Nordics Awards.

William Hill stands to learn a thing or two from Mr Green on product development and back in February 2018, when Bengtsson’s hire was touted as a move to hone the operator’s product offering, the deal proved the perfect solution to all of Hills’ woes.

“[Overall] I think it’s a really good move for William Hill. It makes all the sense in the world and it’s truly a good thing that we’re all aligned on that,” Bengtsson summarises. On whether it will spur on further deals for the operator, Bengtsson says nothing is planned in the imminent future, but added: “We are always looking to see if attractive opportunities come up”.