February 19, 2008

Ladbrokes: Full Lewis bid ‘unlikely’

The possibility of Ladbrokes being subject to a full takeover bid from Joe Lewis, the Bahamas-based billionaire, was dismissed as unlikely by industry sources speaking today to eGaming Review.

This morning it was revealed in The Times that Lewis is behind a notice to the London Stock Exchange last night from Citigroup that it had built up a near 7% stake in Ladbrokes on behalf of a client.

“I can’t imagine there would be a bid,” said one industry source. One unnamed analyst added that he doubted Lewis would “could afford or would have the inclination” to attempt a full takeover. “It’s a bit of an anti-climax really,” he added.

However, the possibility of a bid coming form another direction could not be dismissed, suggested the industry source. According to The Times report, Lewis is thought to be close to other Ladbrokes investors, including John Magnier and JP McManus. It added that private-equity firms could also be waiting in the wings, such as Apax Partners which is thought to have put a bid in to buy Ladbrokes when it was de-merged from Hilton Group in 2006.

However, commentators have questioned in recent weeks the chances of anyone managing to raise the money to buy Ladbrokes, given the present gloom surrounding the debt markets. At present share price levels, Ladbrokes would cost a shade under £2bn, plus around a further £1bn in debt.

Recent investment activity by Lewis includes shelling out US$860m in September last year for a 7% stake in brokerage firm Bear Stearns and raising his stake to 10% three months later, making him Bear’s largest shareholder. Bear’s shares then fell 7% in January on the news that chief executive James Cayne would be leaving his post in the near future and the value of Lewis’s stake in the company has fallen from US$1.2bn to US$840m in the process. Lewis is said to have made a paper loss of more than US$100m on Bear so far, with the figure likely to be closer to US$200m once the cost of raising his stake in the company is take into account.

One of the many high profile investments Lewis made goes back to 2000 when his English National Investment Company (ENIC) acquired a 27% stake in north London football club Tottenham Hotspur for £22m before taking full control of the club in September last year. At the time of its initial investment in Tottenham, ENIC also acquired online bookmaker Ukbetting for £500,000 and was in talks to buy out sports spread-betting operator Sporting Index and Gibraltar-based bookie Victor Chandler International, but neither of those deals materialised.