WH-Playtech to begin valuation process in November

William Hill has begun its “contractual valuation process” of Playtech’s 29% stake in its online joint venture business, worth as much as £493m according to analysts, and will make an further announcement in February next year, CEO Ralph Topping (pictured) said this morning.

While announcing another positive set of quarterly results today, last year’s eGaming Review Operator of the Year said it would commence the contractual valuation process in November ahead of the potential exercise of its option to acquire the minority stake in William Hill Online. The process will formally end in February 2013 after which time it has a “short period to determine whether or not to exercise its option at the value determined by the process”, a statement read.

Despite the statement suggesting “there can be no certainty that the option will be exercised”, it is widely understood the company is almost certain to acquire Playtech’s high performing stake, that WHO would be integrated into the larger group and that it would continue as a Playtech licensee taking its casino, poker and bingo software and work withy its mobile arm Mobenga. If not exercised, William Hill has a further option right in two years’ time.

The first step in the process is for William Hill and Playtech to each appoint a bank to value the stake on their behalf, with a third jointly appointed at a later stage. A key part of the valuation will be for each financial institution to assess the future impact of a 2014 Point of Consumption Tax on UK-facing operators and to what extent it would affect William Hill’s profitability.

In a statement this morning Playtech described the venture as “one of the most successful ever in online gaming” and a “key driver of William Hill’s overall success”, adding that it “continues to engage in constructive discussions with William Hill regarding the future of the JV.

“WHO is a key driver of William Hill’s overall success and, as a major supplier to WHO and the wider business, Playtech is dedicated to maintaining its close working relationship with William Hill to support its continued growth, as is the case with all of the Company’s licensees,” the supplier said.

“In the event that the option is exercised Playtech is committed to the smooth handover of the 29% stake in order to ensure a seamless transition and support WHO’s growth going forward.”

Analyst estimates for Playtech’s stake vary between £300 to close to £500m. Morgan Stanley analyst Vaughan Lewis yesterday issued a note valuing Playtech’s share of the online business to be worth as much as £493m.

Hills is also in the midst of a joint takeover bid alongside GVC Holdings of rival operator Sportingbet whereby it would look to acquire the London-listed business’s Australian and regulated divisions while GVC would buy its assets in unregulated territories such as Latin America. William Hill’s second offer for the business is thought to be worth up to £455m with Sportingbet due to make a decision on whether or not to recommend the offer to its board by 13 November. If both deals are accepted Hills analysts agree that it would look to raise between £300m to £400m of new equity in order to finance both transactions.

Numis’s Ivor Jones, said he would retain his hold recommendation “while we wait to see how these uncertainties [Sportingbet bid and Playtech stake] are resolved”.

Announcing its third quarter results this morning William Hill Online continued to perform strongly delivering 18% growth in net revenue with online operating profit rising to £34.8m, 42% higher than the previous year. Playtech’s non-controlling interest was £10.2m.

Sportsbook turnover overall was up 27%, with in-play up 47% and pre-match up 14%. Sportsbook gross win margin was 7.8% compared to 6.9% in Q3 2011 and, as a result, sportsbook net revenue grew by 43% in the period.

Gaming net revenue was up 5% in Q3 with its Vegas Casino growing by 16% and net revenues from the introduction of a live casino product in April this year up 33% with no monetary figure given. Net revenue growth in Playtech casino slowed, down 2%, bingo net revenue was up 6%, while poker fell 24%.

The company described August, coinciding with the London Olympic Games, as “slow” with its September comparative impacted by the rollover of high roller losses in 2011. Market closures, including Australia, also impacted year-on-year growth in the period it added.

Mobile Sportsbook turnover grew 331% and accounted for 27% of the total sportsbook turnover in the period. Mobile gaming also saw substantial net revenue growth of 533% following the launch of mobile Casino and Bingo sites earlier this year.