Why pay off Playtech?
Ladbrokes investor Dermot Desmond, alarmed at the pending merger of UK bookmakers Ladbrokes and Gala Coral, is calling on the “passive” shareholders of Ladbrokes to stand up and stop the deal.
In an open letter to investors on the website saynotocoral.com, Desmond told shareholders the board should “properly evaluate all strategic options open to it before committing to what I believe is the wrong deal.”
“Ladbrokes has a great brand, but unlike Coral, has failed to migrate its customers online,” he wrote. “Ladbrokes needs a new management team to achieve this. However giving away half your company and taking on over £800 million of debt is a very expensive way to recruit a quality management team.”
If the deal goes through as planned this week, Desmond said, it would amount to a “zero premium acquisition of Ladbrokes by Coral. The Coral shareholders receive access to liquidity for their shares and significant relief from a £2.2 billion debt burden. In contrast, the Ladbrokes shareholders have suffered a 66 percent reduction in their dividends and will be saddled with gearing multiples 50 percent higher than the current level.”
As if that wasn’t blunt enough, Desmond added that the deal would be “the death of Ladbrokes as an independent company.”
The website CalvinAyre.com says Desmond, who sold his Betdaq betting exchange to Ladbrokes in 2013, owns a 1 percent stake in the bookmaker. According to SBC News, Desmond believes the merger would be good only for Coral and tech supplier Playtech, which would receive a £75 million payout as a condition of the merger. Desmond railed at the “substantial and unexplained incentive payment,” which he said is undeserved because Playtech has not helped Ladbrokes boost its online business.
“Despite its troubles,” Desmond concluded, “I believe Ladbrokes has the potential to be a great company once again and to become a major force globally in online gaming—a sector that is growing fast and where well-managed companies are thriving.”
A Ladbrokes spokesman told the London Evening Standard the company is “not surprised” by Desmond’s views. “We have had significant dealings with Mr. Desmond as both a shareholder and a commercial partner over recent times. We note his views … He has been in extensive dialogue with the management team and not been afraid to talk of undertaking such action.
