Ladbrokes Coral and online gambling rival GVC have renewed talks about a takeover which could be valued at £3.9bn – but with the proviso that the deal could be cut by £800m depending on the final result of a government review of controversial fixed-odds betting terminals (FOBTs).
GVC, owner of Foxy Bingo, said it was willing to pay at least £3.1bn in cash and shares for Ladbrokes, just a year after the bookmaker completed its merger with Coral.
The price is based on the worst-case scenario for Ladbrokes, under which the Department for Digital, Culture, Media and Sport (DCMS) cuts the maximum FOBT stake to £2, hitting the company’s revenues.
But the value will move on a sliding scale depending on DCMS’ final decision due next year, rising to £3.9bn if stakes are set at the highest possible option of £50.
The prospect of a takeover pushed up Ladbrokes shares more than 29% to a closing price of £1.75, valuing the company at nearly £3.4bn.
In the event of a deal, GVC, whose shares closed up 5% at 954.5p, may also shift its base from the Isle of Man to the UK as a result of the deal, with its chief executive, Kenneth Alexander, saying a move was “very likely”.
Based on Thursday’s mid-morning share price, Ladbrokes Coral’s chief executive, Jim Mullen, would be in line for a windfall of up to £4m if the deal goes through because of a “change of control” clause that rewards executives in the event of a takeover.
He would also leave the company, making way for Alexander, who admitted that more employees may have to leave.
Alexander said a merger would probably trigger job losses owing to duplication of roles between GVC, which has 2,500 employees and Ladbrokes, which has more than 10 times as many.
“We have our own proprietary technology and we’ll be using that as the platform of choice for the group, so there’ll be technology cost savings and people savings in that area,” he said.
Alexander added that GVC aims to speed up the growth of Ladbrokes’ online business but expects to be “managing some slight decline” in its network of high street bookmakers.
The proposed deal, which would create by far the largest stock market-listed gambling company in the UK, was announced a year after Ladbrokes completed its tie-up with Coral.
Mullen has repeatedly predicted a wave of consolidation in the gambling industry, fuelling speculation of renewed talks with GVC, which were put on hold amid uncertainty over the gambling review and November’s budget measures.
Under the proposed terms of the deal, GVC said it was prepared to offer 32.7p in cash and 0.141 GVC shares for every share in Ladbrokes.
The variable portion that hinges on the DCMS review would reach up to 42.8p per share, or £800m, depending on where FOBT maximum stakes are ultimately set.
An independent arbitrator, such as an investment bank, may be called upon to set the final price if the government makes any other major changes to FOBTs, such as limiting the number of spins per minute or the number of machines per shop.
GVC shareholders, whose holdings rose in value by 6% after the merger talks were announced, would own a 53.5% majority stake in the group.
“The enlarged group would be an online-led globally positioned betting and gaming business that would benefit from a multi-brand, multichannel strategy applied across some of the strongest brands in the sector,” the two companies said in a joint statement.
GVC said it would flesh out the details of “expected synergies” from the deal if it progressed to making a firm offer.
Ladbrokes has nearly 3,700 bookies on the high street, while the Isle of Man-based GVC has a raft of brands after a series of acquisitions, most recently snapping up bwin.party in February 2016.
Source: The Guardian