Ladbrokes has revealed it is in shock merger talks with fellow bookmaker Coral as CEO Jim Mullen aims to make immediate progress in catch up with rival William Hill.
Ladbrokes has issued a statement to the stock market, responding to press speculation about a merger, in which it admits to having talks. It said: “In response to recent press speculation, Ladbrokes Plc confirms that it is in discussions with the board of Gala Coral Group Limited regarding a possible merger of Ladbrokes and Coral Retail, Eurobet Retail and Gala Coral’s Online businesses, to create an enlarged business which would be listed on the official list of the UK Listing Authority and traded on the main market of the London Stock Exchange.
“Shareholders are advised that there can be no certainty that the discussions between Ladbrokes and Gala Coral will lead to any agreement concerning the possible merger or as to the timing or terms of any such agreement and there can be no assurance that, even if reached, any such agreement would be completed. Ladbrokes also notes that, in the event that such a transaction proceeds, it may undertake a non pre-emptive equity placing to strengthen the balance sheet of the Combined Entity.”
Ladbrokes is also considering postponing a planned Business Review presentation scheduled for 30 June which it says may now be re-scheduled depending on how discussions progress.
It is certainly one of the most stunning potential mergers in the UK gambling industry, the nearest in scale being the merger between bwin and Party Gaming which hasn’t been an overwhelming success. It certainly represents a bold piece of corporate maneouvering from Jim Mullen. He commented:
“Since becoming CEO my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced and I look forward to presenting them to shareholders.
“A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies’ shareholders.
“The Board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms.”
Coral’s bookmaking business has long been mooted for a stock market listing once the company had divested its bingo business, but few would have anticipated this route. A major hurdle for the deal would be the Competition and Markets Authority, whose predecessor the Office of Fair Trading frequently forced bookmakers to sell off any competing ‘local’ betting shops. The deal will likely see a huge number of beting shops from the combined group go up on the market to satisfy competition concerns, providing opportunities for a firm like Paddy Power to expand significantly and instantly.