Ladbrokes, the beleaguered gambling company, has agreed a £2.3bn merger with Gala Coral to create Britain's biggest bookmaker.
The deal creates a company with £2.1bn of revenues and the country's largest estate of betting shops. The combined business, which will be listed on the stock exchange and called Ladbrokes Coral, will have a market capitalisation of £2.3bn. Both brands will be retained.
Ladbrokes has lagged rival William Hill in recent years, particularly in online sports-betting. It hopes that by merging with Gala's digital division, UK betting shop business, and Italian operation it can leapfrog its competitors. Gala's bingo business is not part of the tie-up.
Shareholders in Ladbrokes, which is already listed in the FTSE 250, will have 51.75pc of the new business, while investors in Gala, which is owned by a group of private equity houses including Anchorage Capital Partners and Apollo Global Management, will have 48.25pc. Ladbrokes is also launching a share placing of 9.99pc of its share capital on Friday.
Jim Mullen, who is currently boss of Ladbrokes, will lead the combined company, as was expected. Gala chief executive Carl Leaver will become executive deputy chairman.
Coral executive Andy Hornby, the controversial former banker who presided over the collapse of HBOS at the height of the financial crisis, will take the role of chief operating officer of the UK betting shop and digital businesses, but he will not be on the public company's board.
"This is a major strategic step for Ladbrokes which firmly accelerates our strategy to improve the customers' experience and build recreational scale," said Ladbrokes chairman Peter Erskine. "Ladbrokes and Coral are two highly complementary businesses, with rich heritage and brand presence across the UK and internationally."
Given the deal will create a dominant player in the betting shops, the Competition and Markets Authority (CMA) will likely be a major obstacle to the deal. Without making any disposals, the new company would have more than 4,000 shops.
"Both Ladbrokes and Gala Coral are confident that the merger is deliverable and are committed to working closely with the CMA in its review," the companies said on Friday.
However, they added that "it is anticipated that the combined entity will need to dispose of retail stores to satisfy potential CMA requirements", although even after those sales it will still have the country's biggest shop estate, the companies said.
Cost synergies are expected to reach £65m per annum three years after the deal completes. Ladbrokes also revealed that it was slashing its dividend to 3p as it attempts to shore up its finances.