By Kate Holton
LONDON (Reuters) - British bookmaker William Hill (L:WMH) gave a frosty response to a proposed takeover bid from 888 Holdings (L:888) and Rank Group (L:RNK) on Monday, saying it saw little merit in the merger.
The group's shares jumped 11 percent after William Hill, which is without a CEO and about to lose its market lead following a wave of industry consolidation, said it had received a preliminary approach from casino operator Rank and online gambling group 888.
"It is not clear that a combination of William Hill with 888 and Rank will enhance William Hill's strategic positioning or deliver superior value to William Hill's strategy," it said in a statement.
A three way tie-up would be the latest, and potentially biggest, deal in Britain's betting industry, which is rebuilding in the face of tighter regulations and rising taxes.
If successful the deal would bring together one of the leading online gambling players, Britain's top casino and bingo hall operator and the country's biggest high street bookmaker.
Rank and 888 said they saw significant industrial logic in the deal, delivering substantial revenue and cost synergies from the combined online and store-based operations.
With its stock trading up 11 percent, William Hill has a market value of 3.1 billion pounds ($4 bln), compared with 888 on 844 million pounds and Rank on 986 million pounds.
Analysts at Liberum said the approach partly reflected how far William Hill had fallen given it was only recently attempting a takeover of 888 itself.
Frustrated at its poor online performance, William Hill sacked chief executive James Henderson on Thursday after only two years.
'VULNERABLE'
"There's no doubt that William Hill is vulnerable at the moment given not only the CEO's departure but also following significant turnover in senior operational management," Liberum said.
"This sector has seen major M&A of late and synergy benefits will be a key focus although they are more likely to be limited here given the lack of crossover with Rank."
William Hill was quick to embrace Britons' changing gambling habits, such as placing bets online using smartphones and tablets, often "in play" while watching sport like soccer on TV, but its lead has vanished as others caught up.
It is a market leader with 2,370 bookmakers on the high street, providing betting on traditional horse and greyhound racing, and gaming on machines.
The company made an early attempt to consolidate with a 720 million pound bid for 888 last year, but it could not agree a price with major 888 shareholder, Israel's Avi Shaked. Avi and his brother Aaron Shaked own about half of 888 through family trusts, according to Thomson Reuters data.
The brothers have built one of Britain's biggest online gambling groups, offering sports betting as well online bingo and casino games. Rank, meanwhile, is Britain's biggest operator of bingo halls and casinos.
Since William Hill's failed bid, rivals Ladbrokes (L:LAD) and Gala Coral have agreed a 2.3 billion pound deal, which will knock William Hill off the top spot, while Paddy Power (I:PPB) and Betfair agreed to join forces in September.
888 had agreed to buy UK-listed Bwin.party last year, but it was jilted in favour of GVC Holdings (L:GVC).
($1 = 0.7619 pounds)