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888’s £2.2bn William Hill deal may drive shares up 50%, says Peel Hunt

Peel Hunt tips 888’s £2.2bn William Hill deal to drive its share price 50% higher as the online betting group grabs extra market share


Online betting company 888 Holding’s proposed acquisition of William Hill’s non-US business from Caesars Entertainment for £2.2billion could drive its share price higher, analysts said, as the enlarged group grabs a larger share of the market. 

Peel Hunt upped its expectations for the firm on Monday, increasing its target price by 50 per cent from 500p to 750p.

888 Holdings is currently trading at 390.4p, having risen 1.5 per cent for the day at time of writing, a price at which the analysts said is ‘materially undervalued’.

888’s proposed acquisition of William Hill’s non-US business was announced last week

The Gibraltar-based operator announced the deal last week, with 888 taking on William Hill’s 1,400 UK betting shops and its European business, and creating a combined group of 12,000 employees

It said the takeover would help it deliver at least £100million in annual cost savings, diversify its revenues sources, and enable it to benefit from the fast-expanding sports betting market.

The deal is expected to grow 888’s earnings per share by more than 50 per cent, which Peel Hunt said was a key driver of its decision to boost its target price.

‘William Hill adds product leadership in sports betting to 888’s leadership in online casino, and brings additional scale to both,’ Peel Hunt said.

‘The enlarged 888 would match leading competitors in product and platform investment and benefit from stronger market shares in key markets.

‘In addition, 888 should have the resources to invest aggressively behind its US SI Sportsbook brand, with a real prospect of achieving relevance.’

Reiterating its ‘buy’ rating, meaning it expects the share price to increase by at least 15 per cent over 12 months, Peel Hunt said a key risk for their assessment is the possibility that the William Hill deal does not complete.

The deal will grow 888's market share and is expected to boost EPS by 50 per cent

The deal will grow 888’s market share and is expected to boost EPS by 50 per cent

However, it said there is a ‘remote’ chance of this happening with the deal expected to be completed by next year.

One other possibility that could put a dent in 888’s valuation is ‘greater drag from regulatory change’ than anticipated, should global rule makers impose tighter on the controversial betting industry.

But Peel Hunt said there could be even further upside than its 750p target price should the deal provide ‘revenue synergies’ not yet accounted for or lead to a higher value for 888’s US operations ‘once it has the materially greater cash flow of the enlarged business at its disposal to reinvest’ in the country.

It added: ‘The combined group would be no.3 in the UK and better cushioned against regulatory change. It would also have stronger consolidated positions in Italy, Canada, Sweden, Spain and the Netherlands. In all these countries, and more, it would have a stronger platform for profitable growth.’



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