William Hill could overtake Ladbrokes as it eyes £500m Stanley Leisure deal

William Hill, the UK's second largest bookmaker, is in talks to buy the betting shop arm of its smaller rival Stanley Leisure for an estimated £500m.

William Hill, the UK's second largest bookmaker, is in talks to buy the betting shop arm of its smaller rival Stanley Leisure for an estimated £500m.

If successful, the deal will see William Hill overtake Ladbrokes - the betting chain owned by the hotel group Hilton - as the UK's largest bookmaker, adding more than 600 sites to its existing 1,600-strong chain of betting shops.

Since floating on the London market almost three years ago, William Hill has made a series of small betting shop acquisitions, but has always maintained that it would look at any larger packages if they were to come to market.

Stanley Leisure has said previously that it would consider selling its betting shop division if it was offered the right price, but has not actively been trying to sell the business. The group as a whole has been the subject of takeover speculation over the past few weeks, after Genting, a Malaysian conglomerate with a prominent gaming division, built up a 17 per cent holding in the company.

Shares in Stanley Leisure rose more than 2.2 per cent last week on speculation that Genting was considering buying both Stanley and London Clubs International, in which it owns a 22 per cent stake, with a view to merging the two companies' casino arms. On Friday, its shares closed at 472p, giving the company a market value of £609m.

News of William Hill's talks with Stanley are expected to prompt a number of other companies, such as Coral and Tote, the Government-owned bookmakers, to enter the bidding for the betting shops.

William Hill could run into competition issues even if its bid is accepted by Stanley Leisure. But David Harding, William Hill's chief executive, said recently that he believes the group could add up to about 600 shops without falling foul of competition laws.

Last month, the group announced it was to return £453m to shareholders after a Government U-turn over its latest Gambling Bill. Plans to liberalise the UK gambling industry, allowing many more casinos to be opened, were watered down after opposition from both outside and within Government.

However, the group's strong balance sheet means it is unlikely to have any problem funding a take-over of Stanley's betting shops, even after it has handed back the cash to shareholders. The cash return, equivalent to 115p a share, will be by means of a B-share issue, and is expected to take place in July.

William Hill and Stanley Leisure both declined to comment.