Ladbrokes Coral targeted by ‘opportunistic’ rival GVC in potential 3.9bn deal

Ladbrokes Coral targeted by ‘opportunistic’ rival GVC in potential 3.9bn deal

The boss of GVC has acknowledged his company’s multi-billion pound bid for rival Ladbrokes Coral could be considered “opportunistic” given the uncertainties swirling around a big Government review into the industry.

Kenny Alexander, who has orchestrated his company’s rise into the FTSE 250 with the help of two large deals to buy Sportingbet and Bwin, said his firm had employed a “clever structure” for the latest bid which affects the amount it pays depending on the outcome of the triennial review into the gambling sector.

“We are getting first-mover advantage,” Mr Alexander said, adding that he had been “keen to do a deal for some time”.

Should the bid be successful, the combined company will become one of the world’s largest online and retail gambling groups and be propelled into the FTSE 100 with a market capitalisation of roughly £5.3bn – larger than retail stalwart Marks & Spencer.

GVC tried to make a bid for Ladbrokes Coral earlier this year while the Government was still working on the triennial review but was rebuffed.

One of the big issues that ministers are considering as part of the triennial review is whether to significantly slash the amount gamblers can stake on one spin of a fixed odds betting terminal (FOBT) from £100 now to potentially as low as £2.

The Department for Digital, Culture, Media and Sport launched a consultation in October on FOBT stakes after its near year-long review into the gambling sector. It offered £2, £20, £30 or £50 as its options in the consultation. The amount that GVC pays for Ladbrokes if the deal goes through is likely to depend on which figure is chosen.

The consultation closes on January 23. A harsher outcome would mean Ladbrokes Coral’s betting shops could be less profitable, meaning GVC would likely pay around £3.1bn (161p a share). This would rise to £3.9bn (204p a share) if the Government decides on a £50 stake limit.

Lee Wild, head of equity strategy at Interactive Investor, said most people had assumed any gambling mergers were on hold wait until the final outcome of the triennial review but that GVC had found it “too tempting” to wait.

The deal does mean GVC would gain exposure to the UK high street, a segment of the gambling industry whose performance has been more challenged as punters bet more frequently online. At its half-year results in August, Ladbrokes Coral reported a 6pc drop in retail net revenue on a like-for-like basis with operating profits in the division down 10pc to £11.2m.

 

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