(Bloomberg) -- 888 Holdings Plc, the owner of British betting chain William Hill, soared to the highest level in more than four months after a group of gambling industry veterans began pushing for changes at the bookmaker.
Shares of 888 jumped as much as 22% in Wednesday morning trading, extending the previous day’s 14% gain. They were up 20% at 10:33 a.m. in London, putting the company on track for the biggest daily gain since April and giving it a market value of £431 million ($536 million).
The investor group has built a 6.6% stake in London-listed 888, according to a regulatory filing Tuesday that confirmed an earlier Bloomberg News report. The consortium includes Lee Feldman, the ex-chairman of GVC Holdings Plc, the acquisitive betting firm now known as Entain Plc, and several former top Entain executives.
888’s market capitalization has plunged from a peak of about £1.8 billion in 2021 after its debt-fueled takeover of rival bookmaker William Hill’s assets outside the US. Concerns mounted over its borrowings after interest rates spiked, with net debt totaling 5.6 times earnings at the end of last year. That’s also crimped the group’s ability to invest in growth.
Jefferies Financial Group Inc. wrote in a research note Tuesday that 888’s William Hill deal seems “highly similar to the highly successful integration of GVC and bwin, familiar ground for several members of this new shareholder grouping.”
“We read the investment as a positive endorsement of the 888/William Hill integration opportunity, and opportunistic given 888’s low valuation,” Jefferies analysts including James Wheatcroft and Jaina Mistry said.
Feldman has teamed up with other Entain alumni including two of its former chief executive officers, Kenny Alexander and Shay Segev, according to the filing. They’re joined by Stephen Morana, who was previously an Entain director, as well as B. Riley Financial Inc. and its chief investment officer Daniel Shribman.
Numis Corp. wrote in a research note Wednesday it wouldn’t be surprised if one or more of these new shareholders takes a board or leadership position given their experience. 888 is currently looking for a permanent CEO, and its chief financial officer is set to step down at year-end.
The investor group has already contacted 888 with proposals to boost the company’s value that could include leadership and strategy changes, people with knowledge of the matter said.
“We think these are great assets that are currently undervalued,” Feldman said by phone Tuesday.
If anyone can drive 888’s share price back toward where it was when the William Hill acquisition was announced, “it could be this team, making the risk-reward for this group highly attractive,” Numis analysts including Richard Stuber wrote in Wednesday’s note.
Still, while the 888/William Hill combination looks similar on paper to GVC’s Ladbrokes Coral deal, “this turnaround will be more challenging,” they said.
“We are cautious the GVC-Ladbrokes blueprint can be followed this time given 888’s starting leverage,” the Numis analysts wrote. “But given the depressed share price valuation, we understand why this group would want to try.”
A spokesperson for 888 said the investment “reflects the significant value creation potential in our business” and the board remains “highly confident” ion its long-term strategy.
Chief Executive Officer Itai Pazner stepped down from his post at 888 in January amid a probe into whether some of the gambling group’s VIP accounts violated money-laundering policies. In March, its William Hill unit said it would pay £19.2 million to settle social responsibility and money laundering failures. These included customers being allowed to gamble with one group business after self-exclusion from a sister business.
--With assistance from Thomas Seal, Alexandra Muller, Kit Rees and Sam Unsted.
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