William Hill shareholder questions “weaponised” contractual terms of Caesars takeover

The £2.9bn takeover of William Hill by US casino operator Caesars may have misled shareholders, according to Hills shareholder HBK Investments. In a letter aimed at fellow William Hill shareholders, HBK cited a “strongly held belief” that shareholders voting on the Caesars takeover at an EGM in November were not given the full facts. HBK claimed shareholders were not provided with full information on the US joint venture agreement between Hills and Caesars, first signed in 2018, with regards to future bidders for the company. The Dallas-based firm referenced Caesars’ warning to William Hill that any potential takeover of the business by Apollo Global Management, which rivalled Caesars in the bidding process, could jeopardise the pre-existing US JV between the two parties. Under the terms of the JV agreement, Caesars added Apollo Global Management to a list of so-called “restricted acquirers”, i.e. takeover parties, which if accepted, would see Caesars terminate the JV. As part of the JV, if a “restricted acquirer” gained control of William Hill, Caesars has the option to terminate the US JV’s mobile market access rights and rights to operate sportsbooks at Caesars’ premises. However, HBK has claimed that Hills overplayed Caesars’ ability to add Apollo to the restricted acquirers list, suggesting this gave the impression that Apollo’s rival bid was a so-called ‘poison pill’. Poison pill is a defence tactic utilised by a target company to prevent or discourage hostile takeover attempts and allow existing shareholders the right to purchase additional shares at a discount, effectively diluting the ownership interest of a new owner. At the EGM, Hills confirmed to HBK that a maximum of six firms could be added to the restricted acquirers list, with Caesars retaining the potential to substitute one name every six months. HBK has now asked fellow Hills’ shareholders to confirm if they were given information on the restricted asset lists and for their general views on the conduct of the firm concerning the Apollo bid. “HBK believes that this information is highly relevant to shareholders and should have been disclosed in the scheme document,” the company wrote. “Where the terms of a contract between two parties is weaponised during the M&A process in a way which impacts the competitive nature of that process, shareholders need to be made fully aware of all the relevant terms. “The UK market strongly benefits from its reputation as a shareholder-friendly jurisdiction, governed by both the Companies Act and The Takeover Code. It is a rare occurrence indeed to see a ‘poison-pill’ actually being utilised against a UK company. “As such, UK shareholders, who are unaccustomed to such mechanisms, deserved and required a fuller explanation of the restricted acquirers list and its limitations in order to properly assess how to vote,” HBK added. HBK currently holds a 9.5% stock position in William Hill, however this position is currently made up of derivatives which have not been converted into full voting stock. If realised, these shares would make the investment firm one of Hills’ biggest shareholders. Responding to the claims made by HBK, Hills said: “The board of William Hill firmly rejects HBK’s suggestion and is confident that the disclosure contained in the scheme document provided all necessary information to enable shareholders to make an informed decision on how to vote in relation to the scheme. “The board continues to believe that the cash offer by Caesars is in the best interests of all shareholders and, having taken advice from its legal advisers and leading counsel, remains confident that the court will sanction the scheme at the scheme court hearing.” Hills has postponed the scheduled scheme court hearing by one day to allow HBK to state its case, with the takeover now expected to complete on 31 March.