Cinven, CVC Pre-Empt William Hill Flotation –

Cinven and CVC Capital Partners late last month acquired U.K. bookmaker William Hill from Nomura Principal Finance for GBP825 million ($1.328 billion).

The deal was enveloped in its share of controversy, as the Cinven and CVC team-up aborted a proposed initial public offering by Warburg Dillon Read just days before trading was set to start.

Firms Avert IPO Fire Sale

In the face of lukewarm institutional appetite for the offer, Warburg Dillon Read earlier had reduced the price to 135p per share, substantially less than the original indicative price range of 155p to 175p that could have valued William Hill at as much as GBP900 million. The lowered price would have capitalized the company at GBP405 million, giving it an enterprise value of approximately GBP780 million. The prospectus estimated William Hill’s 1998 profits to be GBP93.5 million.

Vendor Nomura, advised by Schroder & Co., entered into talks with Cinven and CVC following the price reduction and sealed the sale just two days later. Nomura, which invested GBP200 million in equity in its GBP730 million buyout of William Hill in autumn 1997, netted a profit of GBP125 million.

Last December, Nomura rejected Cinven’s indicative conditional offer of GBP825 million, convinced it could obtain a higher price through a public offering.

Both Cinven and CVC Capital Partners bid unsuccessfully for William Hill, the U.K.’s second largest bookmaker, when Brent Walker offered the group for sale in 1997. Both groups lost out to Nomura’s higher offer, although many industry observers at the time believed that Nomura had overpaid for the company.

A History of Partnering

Cinven and CVC, which last year joined forces for the GBP1 billion acquisition of Kappa Packaging in the Netherlands, each are taking a 45% stake in William Hill, while management will control the remaining 10% stake. The company currently has some GBP375 million of debt, including a GBP150 million high-yield bond and senior debt provided by a 21-bank syndicate led by BT Alex. Brown.

Cinven Director Guy Davison said the equity providers intend to work with William Hill’s existing senior debt providers and high-yield bond investors. Both the senior lenders and bond investors have put options, which the private equity investors believe they are unlikely to exercise. However, until Cinven and CVC formally have agreed to terms with the other parties, the investors are unable to comment further on their proposed financing structure.

Days before the William Hill deal, Cinven announced its GBP322 million buyout of Dynacast, the global precision engineering division of Coats Viyella, its first U.K. buyout since the GBP860 million acquisition of IPC Magazines in early 1998.

Cinven underwrote the entire funding package for the Dynacast deal and subsequently will refinance the debt component later this year.