Hill’s starts valuation of Playtech’s JV stake

Playtech today received formal notification from William Hill that it has commenced the valuation process for its 29% stake in William Hill Online.

Hill’s confirmed at its Q3 results last month it would be looking to exercise its first call option to buy out the software provider’s 29% stake in its online business.

Hill’s and its JV partner will each appoint a bank to determine a price for the stake in William Hill Online (WHO), with a third independent bank called in to provide an assessment if the companies’ respective valuations are a long way apart.

Analyst valuations for the 29% stake have ranged between £300m and £500m. William Hill will announce whether or not it intends to proceed with the buyout after the formal valuation process completes in February 2013.

Playtech reiterated today that in the event that William Hill did decide to exercise the option, it remained “committed to the smooth handover of the 29% stake in order to ensure a seamless transition and support WHO’s growth going forward.”

Playtech transferred c£144.5m of affiliate and marketing assets it bought from founder Teddy Sagi to William Hill in late 2008 to establish the JV, with Playtech also becoming its primary gaming supplier, providing its poker, bingo and the overwhelming majority of its casino.

Since the integration bedded down, the online business has outperformed all of its listed peers, particularly during the last two years. This momentum continued in the last quarter, delivering 18% growth in revenue and a 42% uplift in operating profit to £34.8m.

But despite the strong financial performance of the JV, the relationship between the two companies has grown increasingly strained during the course of the partnership. In February 2011, Hill’s took out a legal injunction against Playtech to prevent it doing similar deals with other operators, amid rumours its JV partner was talking to arch rival Ladbrokes about a possible £2.2bn merger. The two companies eventually brokered a compromise allowing Playtech to enter software agreements with other large UK companies, paving the way for its July 2011 deal with Gala Coral.

Last October also saw nearly 600 WHO staff stage a mass walkout, allegedly orchestrated by several disgruntled senior marketers and ex Playtech employees with ties to co-founder Teddy Sagi, who holds 49.66% % of Playtech shares through his Brickington Trading vehicle.

Hill boss Ralph Topping (pictured above) is also understood to lack comfort with Playtech’s power of veto over deals written into the JV agreement. Playtech, which bolstered its mobile offering in July last year with the acquisition of Scandinavian supplier Mobenga, is understood to have exercised this veto last November over Hill’s approach for mobile operator and B2B supplier Probability.

Nevada regulators also spent a portion of William Hill’s licence application hearing in June of this year quizzing Topping over the involvement with WHO of Sagi, who was convicted of fraud and bribery in 1996. Topping told the Nevada Commissioners that Playtech’s major shareholder had no role in day-to-day operations and William Hill’s tie with Playtech was simply an investment relationship.