Former William Hill chief backs CVC ownership of Sky Bet

Former William Hill chief backs CVC ownership of Sky Bet

Friday, December 5, 2014

The man who led William Hill under the ownership of CVC Capital Partners has told TotallyGaming.com that he expects Sky Bet to thrive following its takeover by the investment group.

David Harding was recruited as William Hill’s chief executive in 2000, a year after CVC and Cinven paid £825m ($1.30bn/€1.05bn) for the company. He led Hills through its flotation in 2002, when its value had increased to more than £1bn, before finally departing in 2007.

Yesterday (Thursday) it was revealed that CVC had paid what could eventually be £800m for an 80 per cent controlling interest in Sky Bet, and Harding expects the gambling company to go from strength to strength under an institution which has funds valued at $46bn.

While Sky was keen to sell its betting arm to fund its expansion of pay-television networks in Europe, Harding told TotallyGaming.com that he believes CVC has decided to target Sky Bet for its successful mobile offering and effective management team. Harding recalls that back in 1999, William Hill was seen as the gaming company that had reacted best to the new world of online technology, so it is perhaps no surprise that 15 years later CVC has again targeted a leader in a recently-established platform that still has much room for growth.

Harding, now chairman of investment group Radius Equity, told TotallyGaming.com: “Sky Bet is a quality brand with a quality management team. They’re already delivering a superior service, particularly in mobile.

“CVC will seek to continue that and support management with whatever they've indicated in the agreed plan, that they need to continue to grow and develop. The UK is a global leader in legal betting and gaming, so the sector will be of interest to private equity. Within the sector, Sky Bet is particularly attractive because of the brand and participation in the fastest growing segment – mobile.”

Harding’s assessment of the importance of mobile stands up. In its last full-year financial results, Sky Bet cited a 29 per cent jump in mobile customers as the main reason it generated revenue of £183m, which was up 18 per cent.

CVC, in a statement released on Thursday, noted that Sky Bet, after its formation in 2001, “was one of the first operators to recognise the potential of online and mobile platforms for betting and gaming, and today operates across a number of verticals”. It highlighted “Sky Bet’s record of strong growth and high cash generation” as the reason it was willing to pay 15 times Sky Bet’s EBITDA for the year to June 2014, having decided not to pursue a purchase of Betfair in 2013.

CVC, whose portfolio also includes Formula One Group, Merlin Entertainments and Samsonite, seems eager to maintain the bits of Sky Bet that are working well, with managing director Richard Flint and his team remaining in place and Sky retaining a 20 per cent stake in the company and board representation.

While Harding came on board at Hills relatively early in CVC’s ownership period, it was part of John Brown's planned retirement rather than some kind of coup, and he now expects the investment group to back Sky Bet’s existing management team as long as they stay on an agreed course and can back up major decisions.

He said: “CVC always ensures that there is a very clear business plan and that management incentives are aligned to achieve that plan. Beyond that they don't seek to influence culture.

“At William Hill, CVC did not make any major changes to what was already a successful business. They bought into the prospect of growth arising from fiscal, regulatory and technological change.”

As for the future, Harding expects CVC and Sky Bet to formulate a clear business plan and stick to it. However, CVC’s long-term ambitions could depend on hitting certain targets rather than selling on within a particular timescale. He points out that private equity firms tend to hold on to investments for roughly four to six years, although some reports suggest that bigger houses such as CVC and Blackstone are looking even longer term than that.

Harding, who was also a non-executive director at broadcaster and data supplier Satellite Information Services (SIS) from 2000-07, added: “Historically private equity firms have always invested with very clear exit plans and criteria, although it's probably more about target returns than a hard timescale.

“CVC are very focussed on performance and delivery of the agreed plan. They rightly challenge any deviations from plan, and rightly challenge management to understand the business in depth, to solve problems and exploit opportunities.

“That’s not always comfortable, but in my experience they’re very supportive of management teams which really understand their business, manage it dynamically and communicate proactively.”

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