Bet on a one-horse race when it comes to William Hill takeover | Nils Pratley

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Bet on a one-horse race when it comes to William Hill takeover | Nils Pratley

September 28, 2020 Syndicated 0

As a betting event, the fun at William Hill may be over before the takeover action has properly started. A one-horse race may be in prospect.

That nag is Caesars Entertainment, which has indicated a £2.9bn, or 272p-a-share, offer and secured a “minded to recommend” nod from William Hill’s board. The other contender, US private equity firm Apollo, may never reach the starting gate.

That’s because Caesars has reminded the world it has the right to rip up its existing joint venture with William Hill in the US if the UK bookie loses its independence to a named list of firms. Caesars intends to add Apollo to the list.

If the relevant clause is watertight – and apparently it’s not unusual in US gambling joint ventures – Apollo faces a daunting hurdle. After all, the promising US division of William Hill is the one everyone wants. The US sports betting market is growing, while the UK’s is a mess created by the industry’s fixation with fixed-odds betting terminals.

Caesar’s joint venture rights must have been overlooked by those speculators who chased William Hill’s shares above 300p on Friday, when news of the twin bid approaches was made public. The stock came rattling back to 276p on Monday as the imagined bidding slug-fest looked less likely.

Is William Hill’s board right to signal surrender at 272p, though? A few City analysts cite truly adventurous valuations – Jefferies talked about an “upside scenario” price target of 460p.

Such heights look implausible when you consider that William Hill was raising cash from shareholders in June at just 128p. Taking 272p would not be a disgraceful outcome against that marker. In any case, Caesars may now have rendered escape impossible.

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Uber goes in circles

Well, fancy that. Uber has had its ban from London’s streets overturned on appeal, just as happened with the last “ban” in 2017. As then, the taxis were allowed to continue operating through the appeals process so no trade was lost.

Monday’s ruling by Westminster magistrates court represents a defeat for Transport for London but one suspects Sadiq Khan, the mayor of London, won’t be too upset. He is now spared the tricky task of explaining to thousands of petition-signing Londoners why they should take the bus, hail a black cab or install a different firm’s app.

The expected outcome, however, rather reinforces the impression that Uber is “too big to regulate effectively but too big to fail”, as the Licensed Taxi Drivers Association, which represents black-cab drivers, put it.

The pattern seems set. TfL raises safety concerns (in the latest case relating to 14,000 uninsured trips) and then announces a ban because it’s not convinced the company is responding seriously. Uber then adopts the fixes it should have installed in the first place, and persuades the court it is now fit and proper and that “historical failings” should be set aside. It’s a form of regulation, but the lengthy process looks loaded in favour of the company.

As ever, Khan promised that TfL “will not hesitate to take swift action” should Uber fail again to meet standards to protect customers. One struggles with the “swift” part. Are you sure you’re not going round in circles?

Issue of shares is a bit of a Reach

First-half profits fell by almost a quarter at Reach and, sadly, the owner of the Mirror and Express titles cannot afford to pay its shareholders a dividend. Despite a pick-up in digital advertising in recent months, there’s too much Covid uncertainty in the air.

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Reach, though, is proposing a pretend dividend – or a “bonus issue to shareholders” as it said excitedly – “in lieu of, and with a value equivalent to, an interim dividend of 2.63p”. Actually, it doesn’t matter what it’s supposedly worth. If you’re just distributing more shares to the same shareholders in proportionate amounts, there is no economic effect. You’re just giving the owners what they already own.

The exercise, it seems, is being performed for the benefit of income funds, who can flog the “bonus” shares and label the proceeds as “income”. Their percentage holdings will fall marginally as a result, of course, but the window-dressing creates the illusion of income.

It’s a harmless ruse, one might argue. But, come on, an issue of shares is not remotely equivalent to a dividend. Real dividends are available to pay in cash.

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