Executives of Ladbrokes, Plc. And Gala Coral, two of Britain’s largest bookmakers, are contemplating a merger that would create the U.K.’s largest bookmaking operation.
Ladbrokes executives, headed by new CEO Jim Mullen, have been making management moves and testing the regulatory waters for a possible £3.5 billion merger that would create a single company controlling nearly 4,000 high-street betting shops across the U.K. The operator that would be the merged company’s closest competitor, William Hill, has 2,400 outlets.
“A merger has the potential to generate substantial cost synergies, creating value for both companies’ shareholders,” Mullen said in a press release. “The board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms.
“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.”
Those synergies would likely involve closing as many as 1,000 of Ladbrokes’ betting shops. Regulators are expected to require the company to downsize for competitive reasons, since the combined company would control nearly half of the industry in the U.K. Speaking to London’s Telegraph newspaper, analyst Richard Stuber of Nomura said Britain’s Competition and Markets Authority (CMA) could require the merged company to reduce its share of the retail betting market to 30 percent.
Mullen told the Telegraph the merged company would retain both brands of the individual companies. “It’s about growing scale,” he said. “You’d have two branded companies, where we could pool all of our channel strategies and grow our digital business.”
The deal would be structured as a reverse takeover, in which privately owned Coral’s betting shops in the U.K. and Italy and its online business would go under Ladbrokes’ stock market listing. Mullen would likely be CEO of the merged company. The company, which is owned by a group of private equity houses including Anchorage Capital Partners, Apollo Global Management and Cerberus Capital Management, indicated that it would press ahead with a stock market float if merger talks collapse.
