Stanley joins the hunt for William Hill

Liverpool-based bookmaker in talks with Brent Walker
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Stanley Leisure, the Liverpool-based betting group run by Leonard Steinberg, is in talks with Brent Walker over the acquisition of William Hill, the country's second largest chain of bookmakers.

Sources close to Brent Walker say Stanley has been in detailed negotiations with Close Brothers, the debt-laden group's merchant bank advisers, to try and conclude a deal.

"Steinberg has been in talks for several weeks now. It would be a big jump for Stanley, but he has also been looking for buyers to farm out surplus shops," one source said.

William Hill has been on the auction block since banks, led by Standard Chartered, mounted a pounds 1.6bn rescue of Brent Walker in 1991, following the group's over-ambitious expansion in the 1980s under its controversial founder and ex-boxer, George Walker.

Earlier this year, Bass - which owns the Corals chain - was understood to have been in talks, but baulked at the banks' demand of a price up to pounds 500m. Ladbroke and Scottish & Newcastle have also been named as possible buyers.

Banking sources confirm Brent Walker's 1,680-strong Pubmaster chain is also up for sale after flotation plans were scrapped. Former Pubmaster chief John Brackenbury, who resigned abruptly in May, is one of a number of parties in the hunt.

Neither Brent Walker, Close Brothers nor Stanley would confirm or deny the William Hill talks this weekend. Mr Steinberg is currently in Helsinki, and Stanley's finance director, Paul Olive, declined to comment.

The acquisition of the 1,650-strong William Hill chain would quadruple Stanley's betting interests. The group, which also runs 21 casinos, is the UK's fourth largest bookmaker, with around 530 shops, behind Ladbroke, William Hill and Corals.

Analysts value William Hill at anywhere between pounds 380m to pounds 560m, based on a 15-times multiple of earnings, depending on whether profits recover after being severely hit by the National Lottery last year.

Adverse weather, which disrupted horse racing, also took its toll, as operating profits plunged to pounds 38.7m from pounds 57.5m on a turnover of pounds 1.55bn.

Industry prospects have since perked up, however, with a 1 per cent cut in betting duty, the go-ahead for fruit machines in shops in June and the closure of 500 independents in the last year.

In May, Brent Walker wrote William Hill's value down to pounds 428m in its books and Pubmaster to pounds 140m, in a move widely interpreted as a deck-clearing exercise for disposals.

Even at that level, and with partners, William Hill would be a hefty mouthful for Stanley, which is only valued at pounds 263m.

The group, however, has highly rated paper for a possible rights issue after weathering the betting storm better than most.

Founded by Mr Steinberg from just one shop in 1955, it is also highly acquisitive. In May, it snapped up the quoted Gus Carter, with a chain of 74 shops in the North-east and said earlier this month that it was on the lookout for further deals.

Both Bass and Ladbroke would face monopoly problems in buying William Hill, meaning Stanley might still be a winner if a rival deal went ahead.

"They would have to surrender a lot of shops, probably to Steinberg. Stanley would be well-placed in any carve-up," one leisure analyst said.

An early sale has long been scotched by the banks, however, who are owed nearly pounds 400m by William Hill and have been waiting for profits to recover. The impact of amusement machines and a possible mid-week Lottery draw are further clouding the current picture.

They are also waiting for the outcome of a pounds 200m warranty dispute with Grand Metropolitan, from which Mr Walker bought the chain for pounds 685m in 1989. The group claims it overpaid, and the action is currently under arbitration. A decision is expected shortly. "People think they are going to get William Hill on the cheap, but they're wrong. The banks are in no rush to make a move," one banker said.

Meanwhile, Brent Walker sources say the group is also considering a more radical option: "Convert the debt into shares, call it William Hill and float it," one source said.