William Hill Plc, Re Companies Act 2006

William Hill PLC (“the Company”) is a well-established and leading operator of betting shops, gambling companies and online gaming services. It has significant operations in the United States, some of which were conducted under a joint venture agreement with Eldorado Resorts Inc (“Eldorado”) entered in September 2018. Eldorado itself merged with another significant operator, Caesars Entertainment Inc (“Caesars”) in July 2020. The joint venture arrangement continued, but now with the Company as an 80% partner and Caesars as a 20% partner. This was a period of intense merger and acquisition activity following the liberalisation of the sports betting market in an increasing number of US states in consequence of a decision of the US Supreme Court in May 2018.

The Company itself was not immune. Its growing US joint venture business was attractive: and it had an established UK and European bookmaking and gaming business (albeit one facing regulatory headwinds, particularly in relation to fixed-odds betting terminals). Some interest in acquiring the Company was shown by Apollo Management International LLP (“Apollo”) in August 2020. But in September 2020 Caesars, the Company’s US joint venture partner, offered to acquire the entire share capital of the Company for a cash consideration of 272p per share via a bidco. The market announcement of that bid approach referred to a provision in the joint venture agreement under which Caesars had a right to maintain a list of names (and add to or to substitute names) of potential acquirers of the Company and which gave Caesars the right to terminate the joint venture in the event of an acquisition by a party on the restricted list.

The offer did not delight all shareholders. Some felt that Caesars was not offering enough and that the Board should negotiate harder and from a position of strength, presenting an IPO as an alternative to a takeover as a means of realising value.

But on 30 September 2021 agreement was reached on the Caesars’ offer. The Board unanimously recommended it to the Company’s shareholders. First, because the Board considered that some risk attended the exploitation of the US opportunities in an intensely competitive environment and that significant investment was required to maximise those opportunities. Second, because the offer secured a certain cash return to shareholders at a significant premium to the value that was then currently recognised by the market. Third, because Caesars’ proposals for the preservation of the non-US business and for its ultimate disposal and for the protection of the interests of the Company’s 11,500 employees (including those in the UK) in that context were attractive.

On 12 November 2020 Apollo announced that it would not be making a

The mechanism to be adopted for the takeover is a familiar transfer scheme of arrangement under Part 26 of the Companies Act 2006. This is the hearing of an application for the Court’s sanction to be given to the scheme, in relation to which the approach of the Court is well settled. I will consider each of the issues in turn: almost all are entirely straightforward, and I will deal with them as shortly as circumstances permit. But one does require extensive

First, jurisdiction. The matter was considered at the convening hearing and found to exist; no issues arise. William Hill PLC is plainly “a company” within section 895 of the Companies Act 2006: and it is settled that the proposed transfer is an “arrangement” exhibiting the requisite features of giveand-take (see Re Jelf [2015] EWHC 3857(Ch)).

Second, compliance with the statutory conditions and with the terms of convening order of ICC Judge Prentis dated 23 October 2020. The evidence proves that the statutory conditions have been satisfied. The order of Judge Prentis directed the convening of a “hybrid” meeting (both physical and virtual) compliant with the principles identified in Re Columbus Energy[2020] EWHC 2452 (Ch). The meeting was held on 19 November 2020. My function at the sanction hearing is to be satisfied that the arrangements were in fact effective. On the evidence no difficulties were encountered.

Third, I must consider the constitution of the meeting. No class questions arise. All scheme shareholders are treated identically. I note that the directors had given irrevocable undertakings in respect of their personal shareholdings to support the scheme. But at the convening hearing (in accordance with conventional analysis) this was not considered to fracture the class: there is no evidence that the undertakings had any material influence upon the outcome of the meeting.

Fourth, it is established that the requisite majorities were obtained. The scheme was approved by 81.3% of the scheme shareholders by number representing 86.34% by value of those voting.

Fifth, I must consider whether the meeting was fairly representative of those entitled to vote. The meeting was attended in person or by proxy by 1349 scheme shareholders. This was a turnout of 25.77% by number and 54.60% by value of the scheme shareholders. I am satisfied that this may be taken as representative of the constituency entitled to vote. Of those voting, 1336 shareholders cast their votes in advance of the meeting and did not attend.

Sixth, and this is the critical consideration on this application, I must be satisfied that I can properly rely upon the outcome meeting. There are many facets to that prism through which the meeting is viewed. Was information fairly presented to the scheme shareholders? Was there an adequate period for consideration? Were there incentives offered which (whilst not sufficiently material to fracture the class) can be seen in the outcome of the meeting to have significantly influenced the vote? Were votes cast otherwise than bona fide in accordance with class interests? Is there any evidence of coercion? The list of questions is not exhaustive but illustrates the subtle nature of the enquiry: can the vote be trusted?

In the instant case HBK Investments LP (“HBK”) appear by Leading and Junior Counsel (Mr Chivers QC and Mr Blake) to argue that it cannot be and that I should withhold sanction until after another meeting is held, then consider sanction in the light of the outcome of that further meeting. There have also been letters of objection from six other entities (“the Objectors”).

At the date of the scheme meeting HBK held 100 scheme shares (which it used to vote against the scheme). It also held derivative interests in 36.3 million scheme shares, which it had acquired after the bid announcement at

The expression “derivative interests” can cover (amongst other things) put and call options, futures, contracts for differences, spread bets and other contracts where the value of the instrument is determined directly or indirectly by the reference price of the underlying security, but which do not involve delivery of that underlying security. Such contracts may or may not include a power for the owner of the derivative interest to direct how rights attaching to the underlying security shall be exercised. The evidence does not disclose the precise nature of HBK’s “derivative interests” or what powers were conferred upon HBK in relation to the exercise of voting rights attaching to the underlying securities. At times during the hearing, it was assumed that the derivative interests were contracts for differences. Under such a contract the counterparty may or may not have hedged its position by acquiring scheme shares. The realities of business suggest that if HBK entered CFDs then HBK’s counterparty probably would have done so and would exercise voting rights in accordance with the likely wishes of the holder of the CFD. That is, however, an informed guess.

S.897 of the Companies Act 2006 requires that the notice of the scheme meeting given to shareholders must be accompanied by a statement explaining

The Scheme Document contained, as is usual, both a Chairman’s Letter and an Explanatory Statement. The Chairman’s Letter referred to the successful launch of the Company’s mobile offering in the US, but then noted the Board’s recognition (i) that in pursuing those growth ambitions, significant marketing spend and multi-year investment would be required in the context of an intense competitive environment; and (ii) that in order to maximise opportunities in the US the Company would need to broaden the scope of its existing relationship with Caesars. The letter then continued:-

“Following an unsolicited approach from [Apollo] and an initial written proposal from [Apollo] on 27^th of August 2020, [the Company] began discussions with a number of potentially interested parties. On 2 September 2020 [the Company] received an initial written proposal from Caesars. Following this, [the Company] held several rounds of negotiations with Caesars regarding the terms of a potential Acquisition, resulting in the acquisition price of 272p in cash for each William Hill Share. On 27 September 2020, Caesars served on [the

Company] notice of its addition of [Apollo] and its affiliates to a list of “Restricted Acquirers” under the terms of the joint venture agreement between [the Company] and Caesars. Under the joint venture agreement, if a Restricted Acquirer gains control of [the Company], Caesars has the option to terminate the US joint venture’s mobile market access rights and rights to operate sports books at Caesars premises that Caesars currently provides.”

The Explanatory Statement set out the background to the growth of the Company’s business in the US and how “Caesars [was] a key partner in the

US” affording access to 14 states and 54 properties. It then continued:-

“Caesars has the right to periodically add to or substitute namesto a limited list of “Restricted Acquirers” of [the Company](the Company having a reciprocal right in relation to Caesars)whereby inclusion on this list would give Caesars the right toterminate the US joint venture agreement should [theCompany] be acquired by one of these Restricted Acquirers. Termination of the joint venture would have the effect of terminating the US joint venture’s mobile market access rights and rights to operate sports books at Caesars premises that are granted to it by Caesars.” (Emphasis supplied).

The underlined passage is a summary of (and not a quotation from) the relevant provision in the joint venture agreement. The relevant provision

HBK argues that the summary in the Explanatory Statement provides materially inaccurate and inadequate disclosure of the joint venture termination rights by making it appear that those rights are all but absolute and by presenting the Company’s interest in the US joint venture as a “stranded asset” with only a one potential acquirer, so that those casting their votes at the scheme meeting did not have all of the information reasonably necessary to enable them to make an informed decision, with the result that the court cannot rely upon the outcome of the meeting. HBK argues that telling scheme shareholders and those affected by the scheme that Caesars could “periodically add to or substitute names to a restricted list” is significantly different from telling them that Caesars had the right to update its designated list of no more than six names every six months, because the former might (depending on the length of the period) amount to a commercial veto and an effective bar upon a competing bid whereas the latter might (if the six-month period ran from 27 September 2020) represent only a high but surmountable hurdle to the emergence of a competing bid.

To appreciate the weight of this argument HBK submits that the court must go back to the Company’s Annual Report and Accounts 2019. This (signed on 26 February 2020) had stated that there were no significant agreements to which the Company was party which altered or terminated in the event of a change of control in the Company following a takeover bid. It did not specifically identify the Eldorado joint venture.

Then (on 28 September 2020) the Company announced the possible cash offer from Caesars: and it included an “update” on the joint venture. It said:-

“Under the terms of its established US joint venture agreement with [the Company], Caesars has the right to add or substitute names to a limited list of potential acquirers of [the Company] (with the Company having a reciprocal right), whereby inclusion on this list would entitle Caesars to terminate the US joint venture agreement should the Company be acquired by one of these parties.”

The update was to the effect that Caesars had given notice that Apollo would be added to this list, thereby discouraging it from pursuing an alternative offer. HBK submit that until this “update” the market had no idea of the existence of what it calls the “poison pill” and had thought that there was no bar to a competitive takeover.

The description “poison pill” is broadly fair because the Restricted Acquirers provision certainly does have the potential for that effect. But the provision also has a commercial purpose: it is a mutual right which enables either party to withdraw from the joint venture, which operates in a highly regulated area, if there was what one party viewed as an undesirable change of control in its co-venturer. It could terminate the partnership with the undesirable coventurer and seek a new partner.

The “firm offer” announcement of 30 September 2020 cast no further light on the Restricted Acquirer provisions, repeating almost verbatim the text of the 28 September “update”. It was in the knowledge that Caesars had the right to add or substitute names to a limited list of potential acquirers (and thereby trigger the termination right) that HBK acquired its economic interests in the Company. Within days HBK had expressed to the Company’s financial

The Scheme Document (containing the Chairman’s Letter and the Explanatory

On 27October 2020 HBK spoke with Barclays (the Company’s independent financial adviser for the purposes of Rule 3 of the Takeover Code) to communicate its dissatisfaction with the Board’s recommendation and to enquire whether counter bidders would have access to the Restricted Acquirers List.

On 30October HBK contacted the Takeover Panel to request additional disclosure in respect of the JVA and raised the concern that, given the importance of the Restricted Acquirers List, shareholders needed more insight into how the list worked. The request was repeated on 2 November 2020; but the Takeover Panel took no action.

After a telephone call between HBK and the Chairman of the Company, which yielded no additional information, on 18 November 2020 HBK wrote to the Company reiterating its dissatisfaction with the offer price, asserting that the

The scheme meeting was held the following day (19 November 2020). HBK attended and asked two questions. How often could names be changed? Was there a maximum number of names on the Restricted Acquirers list? The answer given was that one name could be altered every six months; but there was a maximum of six names on the list. The first answer was not in fact accurate: all six names could be changed every six months. HBK does not suggest that the mistake was material.

This was new information. No-one sought an adjournment of the meeting to consider it. The Chairman decided not to adjourn. Consideration had to be given to the question whether it was material new information which ought to be the subject of a further announcement. In consultation with Barclays the Company decided that it was not sufficiently material.

On 4 March 2021 HBK renewed its criticism of the board’s recommendation and of the level of disclosure. Its letter advanced the view that the scope for Caesars to invoke a poison pill in support of its acquisition was highly relevant information that should have been fairly disclosed to the scheme shareholders, that disclosure required not simply disclosure of the existence of the poison pill but also disclosure of any relevant limitation upon the power to add or substitute names, and in particular that having been exercised on the 27 September 2020 the power could not be exercised again until 27 March 2021, so that the true scope for the Company to be the subject of a competing takeover offer (in relation to Caesars’ offer or in the future) was not fairly put before the scheme shareholders. HBK restated this position in a further letter dated 11 March 2021, observing that the use of generic language in the Explanatory Statement rather than a recitation of the terms of the Restricted Acquirers provision appeared to be a deliberate choice. In a yet further letter dated 16 March 2021 HBK pressed for information about how the six-month period had come to be selected.

On 18 March 2021 the Company made a market announcement of the opposition of HBK to sanction being given and set out clearly HBK’s objection that the Scheme Document should have specifically described the applicable time limits within which alterations to the Restricted Acquirers list could be made.

That same day HBK caused an open letter sent to the Company’s shareholders and stakeholders. It recounted HBK’s strongly held belief that shareholders voting at the scheme meeting did so without information which would have allowed them to weigh up its true merits in particular with reference to the Restricted Acquirers provision, which it described as “significantly more limited” than that summarised in the Explanatory Statement. The letter urged shareholders and stakeholders to write to the Court and to the Company if they believed that this information should have been disclosed or could have influenced the voting decision.

No person who was a shareholder at the date of the scheme meeting has done so (save one). Nor has there been any response by such a person to the Company’s announcement (from those who did attend or from those who did not attend the scheme meeting). The one shareholder respondent was Seven Pillars Capital Management LLP, which owned 875,064 shares at the date of the scheme meeting and used them to vote against the scheme in any event. It

But HBK does have support from others who held derivative interests at the date of the scheme meeting. Samson Rock Capital LLP (which acquired its derivative interests shortly before the scheme meeting) wrote on 19 March 2021 to support HBK’s view as to the inadequacy of the disclosure relating to the Restricted Acquirers list. GWM Asset Management Limited wrote on 23

There is, of course, the difficulty in weighing these objections that Hildyard J referred to in Re Stronghold Insurance [2018] EWHC 2909 (Ch) at [142][144]. Insofar as these objections go beyond what is said by HBK the court does not have the benefit of argument and it falls to Counsel for the Company to deal with the points raised.

The approach of the court at the sanction hearing is not in doubt.

With those principles in mind, I approach the objections raised.

First, the key question is not whether further information or further detail could have been given by the Company: the question is whether what was given was sufficient for the purpose i.e., to enable an informed decision on the question in hand to be made.

Second, the question in hand for each class member was whether to exit the Company at 272p per share or whether to retain the shareholding and see what value the market attributed to it.

Third, each class member would bring his or her own circumstance to bear in deciding that question. The Explanatory Statement has to be addressed to the ordinary class member and to what are reasonably considered to be his or her interests as a class member. Thus, the Board had to disclose the objectively main facts as to the circumstances in which the exit opportunity arose and the full terms of that opportunity. The Board also had, by reference to the current and anticipated business of the Company, to explain why it said that the opportunity should be taken and the main facts objectively relevant to that explanation. In essence, these related (i) to the prospects for the UK and

Fourth, whilst it may be material to disclose to the ordinary class member the existence of a termination right in relation to a key business relationship it does not follow that it is necessary to disclose the precise terms. The relevance of the precise terms will vary according to the circumstances which each class member brings to bear on the decision process. To the holder of derivative interests (treating him or her as a class member for this purpose) who purchased at a reference price above the offer price and who is embarking upon “bumpitrage” (soliciting support for opposition to the proposed bid in the hope of eliciting an increase in the offer price of 272p or a competing bid) the precise terms of a poison pill may well be significant. Unless they can procure a higher offer or induce a competing bid, they will suffer a loss upon their speculation. But an ordinary shareholder who recalled that his or her shares had slumped to 37p only six months before the Caesar offer is likely to view an offer of 272p per share very differently. So too would a shareholder who had acquired shares at the placing price of 128p per share only three months earlier, in June 2020. So too would a shareholder for whom Caesars’ offer represented a more than 50% premium to the value attributed by the market the day before the Caesars’ approach. I am not convinced that class members

Fifth, it is easy to say that more information should have been provided in relation to what is asserted to be a matter of significance to a shareholder’s consideration. For example, in the instant case Kite Lake Capital said at one point that insufficient information had been provided about the status of the proposals to divest the non-US business to enable shareholders to be satisfied that full value was to be obtained. Again, GWM Asset Management Ltd said the scheme shareholders were not told of the contemporaneous flotation of a company in which the Company had a significant minority interest. The court must be astute to see such “deficiencies” are not deployed to frustrate the wish of the statutory majority and to turn the sanction process into some sort of game whose object is to enable those who buy into a bid situation to maximise their returns. That is why the court imposes the filter of needing to be satisfied that the deficiency is such that it caused mistaken votes to be cast: that if the deficiency had been rectified then it would have caused an assenting shareholder to have changed his view or an abstaining shareholder to have voted against the scheme. On this see Re Heron [1994]1 BCLC at 672a-674d. The objections arise principally (if not entirely) from those who were (at the date of the scheme meeting) holders of derivative interests acquired after the announcement of the bid approach. Nobody who was a shareholder as at the scheme meeting has aligned themselves with the objections raised (save only Seven Pillars to whom the “deficiency” was irrelevant). No shareholder has said that they cast their vote under a material misapprehension: notwithstanding HBK’s open letter of invitation to do so, or the Company’s

Sixth, Counsel for the Company submitted that I should approach objections by holders of economic interests with caution: Mr Chivers QC, on the other hand, said that as a judge in a business court I should recognise business realities. But I think that there is something in the cautionary note. I should be wary about overturning the views of those who were entitled to vote because of objections taken by those who were not entitled to vote. The evidence does not establish (save perhaps in the case of TIG Advisors LLC) what control the holders of economic interests had over the votes attaching to the underlying shares (assuming that the counterparty had hedged its liability under the derivative contract): nor does it establish how such powers were exercised or how the votes attaching to the underlying shares were in fact cast at the scheme meeting. (I have not overlooked the fact that HBK did vote against the scheme in respect of 100 shares).

Seventh, it is of course necessary to consider the impact of the provision of new information at the scheme meeting; to consider whether the fact that one attendee asked a question, that the answer was heard only by those attending the meeting, and that many shareholders had voted in advance of the meeting (and so in ignorance of the new information) somehow invalidates those precast votes. One has to enquire what is the likelihood that those who voted in that way (or of those who abstained from voting without knowing about the new information) would have regarded the new information as significant. I

Eighth, the essential point of the objections is to secure the holding of a new meeting (with different shareholders and in different market conditions) to give the dissentients a second chance to dissuade the existing statutory majorities from their expressed views. It is these differentiating factors (a different shareholder base and different market conditions) that the objectors hope will lead to a failure of the scheme and the restoration of their opportunity to profit from their speculation. The position as regards the influence of the nature of the termination right will be the same. HBK’s case is that the vote at the scheme meeting cannot be relied upon because it embodies the misapprehension that Caesars had an immediately effective power to exclude a counterbid. But in any announcement preceding the new meeting the Company would be bound to communicate that Caesars had the right every six months to add to or substitute names to the Restricted Acquirer’s list and that the right was now immediately available so that Caesars had an effective power to exclude a counterbid. The original meeting was (on this analysis) held upon the same basis as the proposed new meeting would be held.

Having weighed these matters I am satisfied that I can rely on the outcome of the scheme meeting because (i) the Explanatory Statement contains sufficient information for an ordinary class member to make an informed decision upon the question presented by the scheme; (ii) if there was a deficiency it was not one of sufficient materiality to cause an ordinary class member to change his or her vote; (iii) there is no evidence that any class member was actually misled; (iv) I should in any event be reticent about overturning the vote of class members largely at the behest of those who were not class members (but simply persons or entities affected by the scheme); and (v) any new meeting could not invite class members to consider the scheme on any basis other than that upon which it is alleged they considered it at the original meeting (these being independent as well as cumulative reasons).

Having considered the sixth issue at length I can turn to the penultimate issue:

The essence of the present scheme is that the scheme shareholders are being invited to give up their rights as shareholders in the current and future business

The final question to address is whether there is some “blot” upon the scheme which prevents it from being effective. It is not suggested that there is.

For these reasons I sanction the scheme (upon the usual undertaking from the acquirer which is proffered).