William Hill’s rocky relationship with its joint venture partner, Playtech, the gambling group’s online software provider since 2008, is reaching the point where something has got to give. In the words of one person with knowledge of the situation: “The status quo is the worst-case scenario”.
 
For two years, the partners enjoyed the limelight with their joint enterprise, William Hill Online, becoming one of the biggest online gambling operations in Europe. For William Hill, this quickly solved the dilemma of how to set up from scratch a market-leading operation online, a segment of the gambling industry that back at the beginning of 2008 it had seriously neglected.
 
For Playtech, which took a 29 per cent stake in who in return for providing the software for online casino and poker games and the personnel to drive customers to who’s websites, the joint venture underpinned its claim to be top dog in online gambling software. New clients queued up to sign deals with the group as the profits generated by the who operation became clear.
 
But this year the partnership has begun to unravel. In February, William Hill took out an interim injunction to prevent Playtech from selling its 29 per cent stake.
 
In September, William Hill announced it was in talks to buy Probability, a mobile betting operator. But the deal was pulled amid claims it had been vetoed by Playtech.
 
Then, last month, a walkout of WHO staff in Tel Aviv forced Ralph Topping, chief executive, and others to fly to Israel to deal with a dispute over allegations that William Hill planned to relocate who’s operations there to its other base in Gibraltar.
 
Relations were hardly helped when Mr Topping posted a caustic blog over the weekend making fun of his Playtech counterpart, Mor Weizer, and the difficulties he had in getting hold of him.
 
“The current period of Trappist-like silence from Mor with me is nearly a week,” Mr Topping wrote. “It’s easier trying to get through to Lord Lucan ... ”
 
Mr Weizer declined to comment on the blog or on the relationship with William Hill, although he is said to be unconcerned by the jibes.
 
However, the real combatants in this relationship are Mr Topping and the Israeli Teddy Sagi, the 40 per cent owner of Playtech. “It’s like Ali versus Frazier,” said one person who knows both men. “They are two individuals who aren’t scared of each other.”
 
Mr Topping’s blog alludes to a wider problem William Hill has had with its partner. WHO employs almost 1,000 people in Tel Aviv, Manila and Sofia. Manila is a WHO facility owned and run by Playtech. But William Hill insiders say they have had continual battles with members of who’s management to gain access to information and data.
 
Playtech’s argument is the dispute was a who matter that did not involve Playtech staff nor Mr Sagi. But William Hill insiders believe the Tel Aviv personnel – who are critical to the operation because of their knowledge of online media buying and Playtech software – were more loyal to Mr Sagi than to the company that employed them.
 
The short-term resolution is that up to 40 Tel Aviv-based WHO staff have left, as has Eyal Sanoff, the operation’s chief marketing officer.

But the long-term issues remain. William Hill has an option to buy out Playtech’s 29 per cent stake in who, either in 2013 or 2015. Given William Hill’s problems in trying to find out information about its who asset, there are two salient questions: what exactly would William Hill be buying; and what guarantee would the group have that the Tel Aviv staff would stay with who?
 
Ivor Jones, an analyst with Numis, said the origins of the dispute lay in the 2008 joint venture. “William Hill did not know what they had bought,” he said. “They did a presentation after the deal was signed and weren’t able to list the brands they had acquired.”
 
One such brand, 32Vegas, had to be closed down after rival online gambling company 32Red claimed it was infringing its trademark – a position it subsequently successfully argued in the High Court.
 
Mr Jones said it was becoming more apparent with every dispute that the joint venture agreement was “badly constructed” and appeared to give Playtech a veto over the enterprise’s strategic direction.

“If, as is rumoured, Playtech prevented William Hill from buying Probability, it would be clear William Hill doesn’t have complete control over WHO,” he said.
 
Playtech is understood to have made its views known to William Hill it was against the Probability deal but that it was ultimately a William Hill decision.
 
As to whether William Hill will take up its option, the Playtech view is that it hopes it does not and that Playtech remains a sleeping partner in WHO. Talks are understood to be planned between the partners later in the year. However, it can safely be assumed that if William Hill does indeed move to buy out its partner, a high price will be demanded.

This is a reprint from ft.com to view the original, click here.