Avigur Zmora, who steered the William Hill transaction through its completion process will step down from his role as a director of the company with immediate effect, although he is to remain available as a consultant to the company and a board of directors that is grateful to him for his past contributions and his continued commitment to the business.
The deal between the two major online gambling companies involved the acquisition of assets, businesses and contracts comprising Playtech's affiliate marketing business, customer services operation and gaming brands and websites by Will Hill. As part of the transaction the newly created William Hill Online entered into a contract with Playtech for a minimum of five years for the provision of online gaming software for poker and casino, with an option to move into other product areas.
The transaction combines two highly complementary businesses. William Hill Interactive brings strength of brand, sports betting expertise and an established UK customer base and profit stream. The Purchased Assets bring online marketing and customer retention expertise, an extensive affiliate network and an established European customer base and profit stream. In addition, access to Playtech's software network is expected to provide greater liquidity for poker and lead to increased customer retention, customer reactivation and player lifetime values.
The Orbis platform, which will be used for the sports betting business, remains unaffected by the transaction.
William Hill plc will control and operate William Hill Online, which will remain a consolidated subsidiary, with Playtech's share of profits shown as a minority interest. Playtech acquired various online gaming businesses, marketing assets and contracts for a total consideration of around $250 million in cash as part of the transaction, the majority of which represent the Purchased Assets. As consideration for the Purchased Assets, Playtech receives a 29 percent interest in William Hill Online, with William Hill owning 71 percent.
Playtech's ownership interest in William Hill Online can increase from to 32 percent depending on certain conditions relating to the integration. William Hill has an option to acquire Playtech's interest on an independent fair value basis, exercisable after four and six years. Playtech has the right to receive a portion of the option proceeds in William Hill shares, not exceeding 10 percent of William Hill's outstanding share capital at the time of issue.
For the six months ended 1 July 2008, William Hill Interactive generated net revenues of GBP 68 million and EBITA before exceptionals of GBP 28 million. For the same period, the Purchased Assets generated net revenues of GBP 26 million and pro forma EBITA of GBP 8 million. On a pro forma basis for the year ending 31 December 2008, William Hill Online is expected to generate net revenues of GBP 190 million and EBITA of GBP 75 million. Net revenues are targeted to grow by more than 50 percent between 2008 and 2010.
In 2009, focus will be on net revenue growth with margins maintained. In 2010, focus will be on continued net revenue growth and improving margins.
The transaction was expected to require limited upfront cash with capital expenditure, transaction costs and integration costs of approximately GBP 24 million.
William Hill plc appointed Henry Birch as CEO of William Hill Online, in October 2008. He was previously Chief Executive of Leisure & Gaming plc. William Hill Online will draw on the strengths of the management team of both sides with Eyal Sanoff as Chief Marketing Officer, Peter Marcus as Chief Operating Officer and the finance and legal functions being provided by William Hill.
Playtech will provide further information to investors in its normal pre-close trading statement on 22 January 2009.
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