William Hill Organization Limited Business Information, Profile, and History

Company Perspectives:

William Hill intends to pursue a strategy aimed at delivering sustainable earnings growth and value for shareholders. The key elements of this strategy are to: Continue to enhance traditional earnings and maximise organic growth opportunities; profitably exploit new platforms; capitalise on opportunities arising from regulatory, fiscal and technological change; and selectively pursue value-enhancing acquisitions.

History of William Hill Organization Limited

William Hill Organization Limited is the United Kingdom's second largest betting shop owner, with more than 1,500 shops, placing it behind Ladbrokes, part of the Hilton Group. That operation registers an average of 750,000 bets per day, covering 16 sports and some 38,000 sporting events per year. Yet William Hill also has become known for its quirky "amusement" bets, which have included taking odds on the outcome of the Dallas TV episode "Who Shot J.R.?," and whether the winter season will see a white Christmas. Since the late 1990s, William Hill has expanded successfully beyond its storefront betting parlors to capture the leading shares in the telephone betting market--the company has more than 400,000 registered telephone bettors, of which more than 150,000 are active bettors. The company also has extended its telephone betting services across Europe, and especially into Germany and Italy. William Hill also has taken a leading position in the online betting market, setting up its online sportsbook and casino operations in 1998. Set up in the Dutch Antilles in order to skirt stiff British betting taxes, the company's online business, available in ten languages and 12 currencies, attracted more than 12 million customers from 150 countries in 2001. After aborting a public offering in 1999, William Hill finally listed its stock on the London Stock Exchange in June 2002.

Origins in the 1920s

Born in Birmingham, England, in 1903, William Hill was already taking illicit, or off-track, bets at area pubs by 1920. While cash-based betting had been illegal since the 1850s, bookmakers were allowed to take bets based on credit. In 1925, Hill made his first attempt to enter credit-based bookmaking, with a focus on horse racing. But that operation quickly folded when Hill lost his start-up capital.

The legalization of organized greyhound racing in 1926 gave Hill his next opportunity. Hill moved to London in 1929, placing bets on the greyhound races held there. Hill's success enabled him to become a part owner of the Northholt Park racetrack. By 1934, Hill was able to open his first off-track betting parlor for credit-based bets. Hill's new business flourished, and, after moving to a new location on Park Lane, Hill incorporated his company as William Hill (Park Lane) Ltd.

From his new offices, Hill expanded his betting operations, offering ante-post odds and then adding fixed odds for soccer--known as football in the United Kingdom--matches. The football operation proved particularly successful, and in 1944 Hill moved that business to its own quarters, establishing a second business, William Hill (Football) Ltd. By then, Hill also had extended his operation outside of London, opening up a subsidiary office in Scotland.

By the early 1950s, Hill was able to claim more than 400,000 customers. He also had proven himself to be a skilled breeder, after winning the Derby with his horse, Nimbus. Meanwhile, the company's continued success led it to go public in that decade. In addition to taking credit-based bets, the company also accepted postal bets--as long as they were postmarked before the day of a race. Meanwhile, the restrictions on cash bets had created a vibrant black market industry, often operated in collusion with corrupted officials.

The British government legalized cash-based betting in 1961, and bookmakers were allowed to open off-track betting parlors. Nonetheless, the new shops were placed under a number of restrictions--such as being forced to black out their windows, limitations on opening hours, and the barring of food and beverages--which combined to give the off-track betting parlor an unsavory reputation. William Hill himself decided not to enter the newly legalized category and refused to open off-track betting parlors.

Hill gave in on his stance as the off-track betting parlors rose in popularity into the mid-1960s. In 1966, Hill entered that business by buying up a number of shops. This was a costlier move than setting up his own shops at the outset would have been, particularly since bookmaking had suffered two significant blows. In 1964, the British government imposed a hefty 25 percent gambling tax on fixed odds betting, William Hill's mainstay. Then, in 1966, a new betting duty was instituted. Initially set at a 2.5 percent rate, the duty was steadily increased, hitting 6 percent by the 1970s, and 10 percent by the 1990s.

Changing Hands in the 1970s and 1980s

Throughout the late 1960s and 1970s, William Hill continued to open new betting shops, while adding others through a string of acquisitions. The company was able to impose itself as one of the leaders of the vast market--which had seen the opening of nearly 15,000 off-track betting parlors across the United Kingdom by the mid-1970s. William Hill's network continued to expand, growing to 800 shops by the mid-1980s.

Beyond sports and race bets, William Hill also was branching out into so-called "amusement" bets, such as accepting a bet, at 1,000-to-1 odds, that a man would walk on the moon before 1970--a bet the company lost in 1969. Another amusement bet gained the company worldwide publicity in 1980, when the company fixed odds on the culprit behind the "Who Shot J.R.?" mystery in the television program Dallas. By then, the company changed hands, when it was bought by British retail giant Sears Ltd. after William Hill's death in 1971.

Under its new owners, William Hill branched out in racing sponsorships, backing such races as the William Hill Futurity at the Doncaster racing grounds--a race won by the company's own stable of thoroughbreds in 1976. By then, William Hill had become the United Kingdom's largest horse racing sponsor. In 1981, the company, on the back of its "Who Shot JR?" notoriety, attempted to break into the U.S. market as well, sponsoring the William Hill Trophy at the Belmont Park racetrack in New York.

Television coverage of races was allowed into betting parlors in 1986 for the first time, although restrictions remained on the size and number of televisions allowed in the shop. The introduction of television enabled William Hill to introduce, in 1987, its Hillsport system of text and audio to its network of shops. By then, the betting sector had begun its first round of consolidation, and in 1988, William Hill was sold to Grand Metropolitan (later renamed Diageo) for £330 million. That company already controlled its own bookmakers network, Mecca Bookmakers.

The combination of William Hill with Mecca, into an enlarged William Hill Organization, created the United Kingdom's second largest bookmaker, behind Hilton Group-controlled Ladbrokes, with 1,800 shops. Meanwhile, William Hill had continued building up other areas of its business, notably its historic credit betting operation, which, after the addition of Mecca, became the world's largest. The company was also rapidly building a telephone betting operation. William Hill had garnered a number of other prestigious titles, including the award in 1975 of an exclusive license to make book for the Wimbledon Championships. In 1989, the company was named the official bookmaker for the PGA Golf Tournament. These were followed in the 1990s by exclusives on such events and venues as Wembley Stadium and the Rugby Union World Cup.

William Hill's stint with Grand Metropolitan lasted only a year. In 1989 fast-growing Pubmaster owner Brent Walker Ltd., led by former professional boxer George Walker, acquired William Hill for £650 million (the figure was later slightly reduced after a lawsuit alleging that Grand Metropolitan misrepresented William Hill's profitability). Under Chairman John Brown, who had begun with William Hill as a "tea boy" in the 1950s, the company continued to innovate. In 1990, William Hill added credit card services for the Grand National; the following year, it introduced a debit card-based telephone betting service.

New Technology Leaders for the 21st Century

The company extended its telephone services beyond the United Kingdom for the first time in 1992, when it began offering betting services in Germany and Italy--complete with German- and Italian-speaking operators. The company later extended the service elsewhere in Europe. In 1993, changes in legislation gave off-track operators more flexibility in their opening times, in particular, allowing parlors to remain open until 10 p.m. William Hill promptly added evening hours across its entire network.

In 1994, William Hill launched Accolade, a loyalty system that rewarded its customers according to their betting levels. In that year, also, U.K. betting shops were granted the right to accept fixed odds bets on football matches, a move made in preparation for a broader series of legislative changes to come the following year. In the meantime, the off-track betting industry faced a crisis with the launch of the first British National Lottery, which threatened to cut into the off-track gambling business.

The year 1975 saw a number of significant changes that not only liberalized the legal gambling industry, but did much to enhance the image of the off-track parlor. Significantly, parlors were no longer required to black out their windows; instead, parlors were allowed to use shop windows to advertise their services. On the inside, shops were now allowed to serve food and beverages, and the size restrictions on televisions were lifted. In addition, parlors were granted the right to sell the National Lottery's instant lottery cards.

William Hill introduced spread betting in 1995. Meanwhile, the betting industry continued to be liberalized. In 1996, shops were granted the right to install slot machines and similar "amusement" machines. The shops also were given the right to sell racing forms and magazines. Then, in 1997, shops were allowed to place advertisements in telephone directories and newspapers for the first time.

The year 1997 marked a new turning point for William Hill. Brent Walker's rapid expansion had brought the company under a crushing debt load--which had already led to George Walker's ouster at the beginning of the 1990s. By 1997, Brent Walker was forced to liquidate its holdings, and, after a sharp bidding war, the company was sold to Japan's Nomura for £700 million, beating out such rivals as investment firms Cinven and CVC Capital Partners. Despite the change, John Brown remained the company's chairman and CEO.

In 1998, William Hill, eager to skirt the hefty gambling taxes and duties imposed on bets from British residents, turned to the Internet, setting up an online betting and casino service. The company quickly established an offshore company, based in the Dutch Antilles, to take over its online operations, enabling the company and its customers to reduce duty fees to just 5 percent. The company continued to lobby for a reduction, if not the abolishment of such taxes, notably with the establishment of an offshore telephone betting service, run through a call center in Ireland, where gambling duties were limited to just 3 percent.

By then, William Hill had suffered a serious setback. In 1999, Nomura announced its intention to float William Hill on the London stock exchange, a move that was greeted with enthusiasm by the industry. Yet at the last moment the company's financial advisors decided to cut the initial quote price, slashing the estimated value of the offering to £400 million. Instead, Nomura turned around and accepted an offer from Cinven and CVC Capital Partners, which offered £845 million for William Hill.

In 2000, William Hill launched a new, international online site, which enabled British gamblers to place duty- and tax-free bets for the first time. This move forced the British government's hand, and, just as it had been forced to accept cash-based betting in the 1960s, the British government now abolished the betting duty. This was replaced by a more equitable Gross Profits Tax in 2001. As a result, William Hill shut down its Ireland-based call center, combining that operation with its existing British facilities. That year, also, the company sold off its spread betting operation to IG Index, and refocused its business on its fixed odds operations.

William Hill at last made good on its public offering in June 2002. Led by new CEO David Harding, who took over after Brown's retirement in 2000, the highly successful floatation, oversubscribed by some ten times, gave William Hill a market valuation of more than £1 billion. By then, the William Hill Organization consisted of nearly 1,600 betting shops, a strong telephone betting service--the company claimed to be the U.K. market leader, with a 40 percent market share--and one of the industry's only profitable online betting operations. Continued legislative changes, including further reductions on slot machine and advertising restrictions, gave William Hill good reason to bet on its own future.

Principal Subsidiaries: William Hill Holdings Limited; William Hill Investments Limited; William Hill Organization Limited; William Hill Finance plc; Camec Limited; Laystall Limited; William Hill Casino NV (Netherlands Antilles); Betwilliamhill.com Limited (Antigua and Barbuda); Brooke Bookmakers Limited; Evenmedia Limited; Eventip Limited; Gearnet Limited; Ixora Company Limited (Antigua and Barbuda); James Lane Group Limited; Matsbest Limited; Vynplex Limited; William Hill Bookmakers (Ireland) Limited; William Hill (Caledonian) Limited; William Hill Call Centre Limited; William Hill Credit Limited; William Hill (IOM) Limited (Isle of Man); Windsors (Sporting Investments) Limited.

Principal Competitors: Camelot Group Plc; Ladbrokes Plc; Coral Eurobet plc; Sportingbet.com (U.K.) Plc; Stanley Leisure PLC; Horserace Totalisator Board; Victor Chandler International Ltd.

Chronology

• Key Dates:
• 1920: William Hill, then 17 years old, begins acting as a bookmaker in the Birmingham, England region.
• 1934: Hill opens his first credit-based betting business.
• 1939: Hill incorporates his company as William Hill (Park Lane) Ltd.
• 1966: William Hill acquires its first off-track betting parlors, which had been legalized in 1961.
• 1971: After its founder's death, William Hill is bought by Sears Ltd.
• 1976: William Hill branches out into horse-racing sponsorships.
• 1987: Company introduces Hillsport text and audio service after betting parlors are allowed to install televisions the year before.
• 1988: William Hill is acquired for £330 million by Grand Metropolitan, which combines the company with its Mecca Bookmakers operations to create the second largest betting parlor group in the United Kingdom.
• 1989: Brent Walker Ltd. acquires William Hill for £845 million.
• 1995: The first of a series of liberalized legislation on betting parlors is introduced.
• 1997: Japanese banking group Nomura acquires William Hill for £700 million.
• 1998: William Hill launches its online sports betting and casino web sites.
• 1999: Nomura attempts to take William Hill public, but instead sells the company to CVC and Cinven for £825 million.
• 2002: William Hill goes public in June, with an initial market value of more than £1 billion.