William Hill, Amaya Merger Dead

William Hill and Amaya announced on Tuesday that they have ceased discussions on a potential £4.6 billion merger, less than two weeks after they confirmed rumors that such talks were happening.

In a press release, Amaya Chairman Divyesh Gadhia said:

Amaya is a strong and growing company with experienced management and a proven strategy to deliver profitable growth and shareholder value. Together with our financial advisors, we evaluated a wide range of strategic alternatives to maximize shareholder value and have concluded that remaining an independent company is in the best interest of Amaya’s shareholders at this time. The Board has full faith in Amaya’s management to execute on its strategy and objectives.

William Hill issued its own press release, saying, in part, “After canvassing views from a number of William Hill’s major shareholders, the Board has decided that it will not pursue discussions with Amaya. Accordingly, the Board has informed Amaya that it is withdrawing from discussions and wishes Amaya well for the future.”

Each company is saying that they were the ones who called off the talks and while each may have come to their own decision, there is evidence that it may have been William Hill that ultimately nixed the deal. Just a few days before the companies announced the end of talks, the co-founders of William Hill’s largest shareholder, Parvus Asset Management (14.3 percent ownership), spoke with William Hill chairman Gareth Davis and interim chief executive Philip Bowcock to express their concerns about a possible merger. Mads Eg Gensmann and Edoardo Mercadante were unable to sway the William Hill execs, so they wrote a letter to the company’s Board, saying, in part:

We strongly encourage that the board and management stops wasting valuable time and shareholder resources pursuing this value-destroying deal. Instead, the board and management must focus on maximising value for William Hill owners, rather than Amaya shareholders, by considering all alternative options available, including a sale of William Hill.

Gensmann spoke to Reuters about his objections. Simon Jessop of Reuters explained:

On the proposed deal with Amaya, Parvus said the Canadian firm’s core business of online poker was the least-attractive segment within online gambling and a tie-up would weaken William Hill’s strategic position in the long run.

Parvus also said the potential deal’s financial structure favored Amaya shareholders at the expense of William Hill’s, despite the latter’s far superior cash-flow generation.

“Effectively, you’re buying an overvalued asset using an undervalued currency,” Gensmann said.

Former William Hill CEO Ralph Topping spoke gave his thoughts to The Financial Times, as well, saying, “I fully support what Parvus are doing, because they are good people. When this deal was announced I was left scratching my head. Both [Amaya and William Hill] have a lot to sort out in their own business. I’m very anxious on the future of William Hill.”