GVC Holdings Enters Merger Negotiations with Ladbrokes Coral

GVC Holdings Enters Merger Negotiations with Ladbrokes Coral

GVC, which also owns Sportingbet and PartyCasino, has tabled a cash-and-shares approach valuing Ladbrokes at 160.9p a share, with loan notes on top worth an extra 42.8p a share.

Now, as the United Kingdom government's ongoing regulatory review continues to cast a shadow over the gambling sector, it would appear that Ladbrokes' management is keen to get a deal done. Under terms of the possible transaction disclosed Thursday, GVC shareholders would hold 53.5 percent of the merged entity.

"Whilst this deal was always likely, most had thought GVC would wait until the government's triennial review of fixed odds betting terminals was finished before it would happen".

The last round of takeover talks broke down in August amid reported disputes about the respective value of the companies.

GVC shares gained 5.72% to 961.0p each in morning trading while Ladbrokes Coral's stock jumped 25.42% to 170.20p.

The Department for Digital, Culture, Media and Sport said in October that the government would cut the maximum bet on the machines from £100 to between £2 and £50.

"Against this it does bring in some geographic risk in GVC notably around Germany following the exit from Turkey, whilst the cash elements, we estimate worth £600m and £800m (max for the triennial review element), are more the comfortable from the existing balance sheet and future cash generation".

Alexander said that talks with Ladbrokes Coral restarted in recent weeks after a deal structure was devised that could account for the different potential FOBT consultation outcomes.

A deal would see Ladbrokes Coral shareholders own 46.5% of the combined group with GVC holding the rest. "You can only sit and wait for so long".

The merger would follow previous combinations like that of Paddy Power and Betfair as well as Ladbrokes with Coral.

As revealed by GVC Holdings in a statement published on the gambling operator's website, the possible offer is expected to be structured as a scheme of arrangement in accordance to which GVC Holdings would acquire the entire capital of Ladbrokes Coral. A larger company could have a greater competitive advantage versus sector peers.

GVC said it expects the deal would results in "material synergies which will create value for both sets of shareholders" and that it will increase earnings per share by a double-digit rate from the first full year post-completion.

Houlihan Lokey and Investec are advising GVC on the deal, while Ladbrokes Coral is working with Greenhill and UBS.