No formal approach has been made but William Hill has been informed of the consortium’s interest

Rank Group and 888 Holdings have formed a consortium that will pave the way for a wider bid for ailing bookmaker William Hill, as the companies are pushed together by a wave of consolidation rippling through the gambling industry.

The tie-up between Rank, the owner of Grosvenor Casinos and Mecca Bingo, and online bookmaker 888 is being driven by a desire to gain greater scale to help absorb the costs from tougher regulation and higher taxes.

“The consortium sees significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies and from the anticipated benefits of economies of scale which will accrue to all shareholders,” a joint statement between Rank and 888 said on Sunday.

Similar factors have driven the dealmaking that has swept through the sector since last year. Betfair and Paddy Power completed a merger in March, while Ladbrokes and Gala Coral are also combining.

Rank and 888 have been in discussions over a potential bid for William Hill for several weeks, though talks remain at an early stage, according to people close to the situation. The companies were forced to make an announcement after the Sunday Times first reported on the tie-up.

No formal approach has been made to William Hill, with Rank and 888 adding that “there can be no certainty that any such approach will be made.”

But the UK’s largest retail bookmaker by number of betting shops was informed of Rank and 888’s interest over the weekend, according to people familiar with the discussions.

Company executives believe that William Hill could be interested in a mega-merger for multiple reasons. Its chief executive James Henderson left the company last week over dissatisfaction with the company’s stalling online growth, at a time when consumers move from placing wagers in stores to betting through apps and over the internet.

Rank Group’s chief executive Henry Birch is on the shortlist to replace Mr Henderson and previously ran William Hill’s online operations.

Last year, William Hill was rebuffed in a £700m takeover approach for 888, after one of online group’s founders, Avi Shaked, held out for a higher offer.

Despite being under pressure to do a transformative deal to revive its online operations, Mr Henderson has been reluctant to return to 888 with a better offer due to concerns over the Gibraltar-based company’s ownership structure and a belief that a sweetened deal could be good value to shareholders, according to people close to his thinking.

Meanwhile, 888 has said it is been looking for acquisitions after failing in its bid for Bwin.party to rival online operator GVC last year.

According to the regulatory process, Rank and 888 have until 21 August to launch a formal bid for William Hill.

William Hill declined to comment but is expected to make a statement on Monday.

Source: Rank and 888 team up in potential bid for William Hill — FT.com