Several months ago, it was speculated that William Hill PLC could–and probably should–buy out Playtech’s stake in their joint-venture company, William Hill Online. This week, William Hill announced it intended to do just that.
Playtech currently owns 29% of the business it founded with William Hill PLC in 2008. At the time, Playtech paid $319.7 million and provided the venture with software platforms and technical solutions. Since its inception, profits have soared; last year saw an operating profit of £106.8 million, and it is already reporting a 42% increase in the third quarter of 2012.
Currently, William Hill Online provides about 30% of William Hill PLC’s total annual income.
So the real question isn’t whether or not William Hill would like to take over Playtech’s share, but how much it’s willing to pay for it. And everything hangs on that small detail.
It all boils down to the valuation. Banks hired by both sides will determine a fair price to be negotiated between the two parties. Should the price be widely disparate, a third, independent bank will be included for an additional assessment. Analysts are figuring the price tag could be worth up to $645 million–that’s nearly double what Playtech invested just four short years ago. To break down the numbers, that comes out to about $39,000 an hour (assuming 40-hour work weeks over four total years). Not a bad profit.
According to the Reuters article, Playtech stated it was committed to a smooth handover of their stake should the buyout occur. This holds promise, as the relationship between the two partners hasn’t always been rosy. Buying out Playtech’s 29% would mean that William Hill would gain strategic control over the business, ending Playtech’s veto vote and allowing it to push forward uninhibited with certain acquisitions.