William Hill in deal with Playtech to expand online gaming operation

The bookmaker William Hill is acquiring parts of Playtech, the software maker, to create Europe's biggest online gaming and sports betting company.

The revelation came as William Hill said the deteriorating consumer downturn had not yet hit its recent growth, which has been boosted by Hull City's surprisingly strong start to the Premier League football season.

William Hill is acquiring an affiliate marketing business, customer services operation, gaming brands and websites from Playtech, the online gaming software provider listed on the Alternative Investment market. The bookmaker has also signed a five-year software licence agreement with Playtech for poker and casino, with the option to move into other product areas.

Ralph Topping, William Hill's chief executive, described the "deferred acquisition" as a "transformational step". He added: "It makes us Europe's number one [online] sports and gaming provider measured by profitability."

The combination of its current operations with Playtech's assets will create a new entity, William Hill Online, which William Hill will control and operate as a subsidiary.

For the year to 31 December 2008, on a pro forma basis, William Hill Online is expected to deliver net revenues of £190m and earnings before interest, tax and amortisation of £75m. William Hill is giving Playtech a 29 per cent stake in William Hill Online, but the bookmaker has an option to acquire its shareholding in four to six years' time.

For the 15 weeks ending 14 October, William Hill posted a 9 per cent uplift in total gross wins, the difference between the amount it has won and punters have lost. The overall performance was boosted by an over-the-counter 7 per cent increase in gross wins, largely driven by favourable sporting results.

Mr Topping said that it had made a killing on recent wins by Hull City, who are third in the Premier League, over Arsenal, West Ham and Tottenham Hotspur. He added: "We will perhaps be hit [by the consumer downturn] at some time, but I don't think it will be in 2008."

As of September 2008, William Hill's net debt was £1,031.5m, a reduction of £27.4m from the position on 1 July 2008. Shares in William Hill rose by 14 per cent, or 23p, to 189.5p, one of its steepest gains in six years.

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