888 Holdings PLC (LSE:888) shares shot up around 30% in Thursday’s early trade as it cut a new deal and launched a reduced equity raise to fund its acquisition of William Hill’s assets outside the US.
The London-listed gaming firm previously, in September, agreed to buy the non-US business of William Hill from American casino operator Caesars Entertainment for £2.2bn and at that time, 888 expected it would need to raise around £500mln of equity to cover the deal.
It has now agreed new terms, valuing William Hill’s non-US assets at between £1.95bn and £2.05bn.
888’s cash call is now expected to see up to 70.8mln new shares sold to investors, which would represent around 19% of its current issued share capital.
In London, 888 shares were up 59.4p or 30.9%, changing hands at 251p.
The placing is to be executed via a bookbuild - run by JP Morgan, Morgan Stanley (NYSE:MS), Barclays and Mediobanca. The same group of banks are also providing some £2.1bn of debt financing to support the transaction.
888 told investors that the smaller equity portion would likely result in its net debt to earnings (EBITDA) running temporarily higher than expected, but management believes that it remains in the best interest of shareholders and that strong free cash flow will see a more rapid deleveraging than it originally expected.
To ensure the accelerated deleveraging, the company said it will suspend dividend payments until such a time that net leverage is at or below 3x.
888 also wedged in a brief trading update for investors, flagging first-quarter revenues in the range of US$222mln and US$226mln, no more than a 2% improvement on the preceding quarter. Year-on-year, revenue was down by a "mid-teens percentage", it said, reflecting regulatory and compliance impacts, the temporary closure of operations in the Netherlands and particularly strong 2021 comparatives.
Meanwhile, 888 said that William Hill’s revenue for the 12 months ended 28 December 2021 amounted to £1.24bn, while its earnings (adjusted EBITDA) was marked at £164.4mln.
888 added that it expects William Hill’s 2022 revenues to grow by “a low to mid-single digit percentage” with “normalisation of retail and underlying progress in online being partially offset by regulatory and compliance headwinds”.
Caesars bought William Hill in a US$4bn deal just over a year ago, with the UK betting group’s digital technology and portfolio of US state gaming licences seen as the jewel in its crown, and by September, Caesars had agreed to dispose of the non-US assets to 888.