Another potential major consolidation of gambling companies was announced when GVC Holdings Plc said it is in talks to acquire UK bookmaker Ladbrokes Coral Group Plc for about $5.2 billion.
It is the third time in about a year the two companies have discussed a possible merger. This deal values Ladbrokes Coral at £3.9 billion, but the price could be cut by £800 million depending on the final result of a UK government review of fixed-odds betting terminals.
The UK is considering a major change to betting rules for fixed odds betting terminals. The government has said it will lower the £100 betting limit on single bets on the terminals—the main revenue source for betting shops—to as little as £2. The UK Department for Digital, Culture, Media and Sport is in a public hearing phase on the cut and has not said what the final betting limit will be, however.
According to the UK newspaper The Guardian, GVC, based on the Isle of Man, is willing to pay at least £3.1 billion in cash and shares for Ladbrokes. The price is based on the UK cutting the maximum FOBT stake to £2. But the value will move on a sliding scale depending on the DCMS’ final decision due next year, rising to £3.9bn if stakes are set at the highest possible option of £50.
GVC owns online gambling platforms including PartyPoker and Sportingbet while Ladbrokes is major owner of betting shops in the UK. Analysts see the merger as enabling both companies to extend their online reach as betting shops are in decline in the UK and online gambling continues to grow steadily.
GVC head Kenny Alexander admitted the bid could be considered opportunistic, according to a report in Britain’s Daily Telegraph.
“We are getting first-mover advantage,” Alexander said. “This deal makes complete strategic rationale. We’ve repeatedly said we were interested in consolidation but that I would not take any risks around the government review, but I think this deal has a clever structure.”
According to various reports, other major players in the UK gaming industry have been waiting for a final determination from the government review before putting acquisition plans into effect.
Should the new GVC bid be successful, the combined company will become one of the world’s largest online and retail gambling groups with a market capitalization of about £5.3 billion, the companies said.
Some analysts, however, cautioned that integrating Ladbrokes.com—which has been losing market share recently—onto GVC’s digital platforms could be costly and time consuming. Alexander, however, told the Telegraph his company has experience in combining large businesses, such as its acquisition of Bwin in February 2016.
GVC would also shore up its exposure in regulated markets, rather than grey markets. If the deal goes through, 90 percent of GVC’s revenue would come from regulated markets, Alexander said.
Under terms of the possible transaction as reported by Bloomberg News, GVC shareholders would hold 53.5 percent of the merged companies. GVC Chief Executive Officer Kenny Alexander would serve as CEO.
The companies also said they would combine through a UK merger process under which 75 percent of voting shareholders of the target company must approve a deal, the report said.
“The boards believe that a transaction has the potential to create material shareholder value and that there is a compelling strategic rationale for the possible offer,” the companies said in a combined statement. “The enlarged group would be an online-led, globally positioned betting and gaming business that would benefit from a multi-brand, multi-channel strategy applied across some of the strongest brands in the sector.
“The enlarged group would be geographically diversified with a large portfolio of businesses across both regulated and developing markets, with the scale and resources to address the dynamics of a rapidly changing global industry,” the statement said.
GVC is required to announce a firm intention to make a bid by January 4.
