Caesars Entertainment shares rallied on Wednesday morning after the casino company confirmed it’s making a cash offer for U.K. bookmaker William Hill.

Last week, U.K. sources reported Caesars is making a buyout offer for William Hill, and Caesars confirmed a $3.7 billion buyout offer this week. Caesars priced a 31 million-share offering to help fund the buyout and also plans to use existing cash and $2 billion in non-recourse debt facilities.

Caesars and William Hill already have a U.S. sports betting joint venture that is 80% owned by William Hill. Caesars said it plans to sell William Hill’s non-U.S. businesses, including 1,400 U.K. betting shops.

On Wednesday, Bank of America analyst Shaun Kelley said he estimates the U.S. sports betting and iGaming markets could represent a $3 billion to $8 billion opportunity for Caesars that could be worth between $14 and $37 per share, assuming the company takes 100% control of the joint venture.

If Caesars is able to divest the legacy William Hill business, Kelley estimates the implied valuation for the sports and iGaming joint venture would be just $1.5 billion to $2 billion, or only about three times his projected 2021 revenue of between $600 million and $700 million.

In July, Caesars completed a merger with Eldorado Resorts, and Kelley said the company’s management is executing its growth strategy well.

“While there are still deal risks, mainly around subsequent divestitures, [Caesars] management has executed well in extraordinary times including completion of the [Eldorado-Caesars] combination,” Kelley wrote in a note.

Investors will be watching for official confirmation that the William Hill deal has been approved by the board and the company’s investors. After the deal closes, the next major catalyst will be the sale of the legacy William Hill business. Private equity group Apollo is reportedly interested in William Hill’s legacy assets.

Following news of the William Hill buyout, Kelley reiterated his neutral rating for Caesars and raised his price target from $45 to $65.

 This story originally appeared on Benzinga.

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Photo by Paul ELLIS / AFP) (Photo by PAUL ELLIS/AFP via Getty Images

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