British bookies go from favourites to American outsiders

What starts in the US, the cliche goes, inevitably ends up in the UK (burger restaurants, assaulting fellow shoppers on Black Friday and syphilis are favourite examples). But the Americans are not always so keen to embrace our exports.

There are, of course, examples of Brits and our brands smashing it in the US: the broadcaster Alistair Cooke, the Beatles and (so the company’s advertising slogan told us) the industrial conglomerate Hanson, which liked to brag how it was “a company from over here that’s doing rather well over there”. But those occasional triumphs are offset with a long list of wonderful-sounding sales pitches that never quite seemed to deliver much – apart from swingeing losses.

Which brings us to the UK gambling industry, a trade that has been talking about cracking America for a period seemingly longer than Cooke’s whole career.

Apart from the odd arrest of British business folk, very little ever came of these ambitious plans. But then, last May, everything appeared to change. The value of London-listed gambling firms – including 888, Paddy Power Betfair and William Hill – collectively surged by more than £1.5bn after the US supreme court struck down a nationwide ban on sports betting that had stood for 26 years. The Professional and Amateur Sports Protection Act of 1992 (Paspa) – which effectively outlawed sports betting in the US with the exception of a few states – was suddenly unconstitutional.

Gambling execs rejoiced. Cigars were lit; deals were unveiled; and share prices went briskly, er, down.

In a note by analysts at Canaccord earlier this month, as the stockbroker studied the gambling sector in a reporting season, the number-crunchers observed: “The UK sector is trading on close to a four-year valuation low, and there is a lot of bad news baked into the price.”

There are all sorts of factors playing into that, of course. There are the inevitable tax rises and regulatory changes that the industry has to contend with in Europe: but not everything is going perfectly with the American dream, either.

There, what bookies might have gained on the Paspa swings they are now fretting about losing on the Wire Act roundabout.

Earlier this month the US Department of Justice performed a U-turn by ruling that the Wire Act – which it had previously said outlawed only cross-state wire communications for sports betting – also contains “prohibitions [that] sweep beyond sports gambling”.

Heads were scratched, share prices retreated and consolidation plans were given even more of a hearing than usual.

In a note in advance of a trading statement from William Hill last week, analysts at the investment bank Berenberg said that the bookie was “now ripe to be a takeover target”, after its share price almost halved over the past year.

Hill’s has been at the forefront of efforts in the US, too, so taking a punt on the company means betting heavily that a liberalising US market will compensate for the lost revenues in its established jurisdictions, where fixed-odds betting terminals have been gelded and the bookies fear more regulation to prevent addiction.

Cooke, of course, once filed a dispatch about this. In a 2001 Letter from America, he reported: “Heartening news this week that a drug has appeared experimentally which promises, one day, to cure even compulsive gamblers.”

That day has yet to arrive. There’s a parallel in there somewhere.