When it comes to bookmakers, mergers and sales aren’t actually all that common. It’s big business and the various industry leaders tend not to make all that many moves unless the market is right. Given that Ladbrokes and Coral only completed their merger in November of 2016, having gone through the necessary machinations in order to get it over the line for nearly a year, it is therefore genuinely fascinating that the new company, Ladbrokes Coral Group plc, confirmed today that they’re being bought by GVC Holdings.
GVC Holdings, for those of you that don’t know, is a gambling operator that works in both the business-to-business and business-to-consumer markets. They’ve already made moves into the bookmaking industry with the 2012 acquisition of Sportingbet and the their 2016 takeover of Bwin.Party Digital Entertainment. Nevertheless, this is one of the biggest moves they’ve made and means that they are now one of the largest betting companies in Britain. Not bad for a company that founded in Luxembourg as recently as 2004 and a sign, perhaps, that the betting industry is one that is constantly open to renovation, fresh blood and new ideas.
It’s Been In The Making For A While
Despite the fact that these sorts of deals don’t actually happen all that often, it does seem as though this one has been in the pipeline for a little while. There have been merger discussions on at least two previous occasions, the most recent of which was in the summer and broke down because of the price that Ladbrokes Coral plc was seeking for its business. In the end they’ve obviously been able to come to an understanding with each other.
The outline of the deal appears to suggest that shareholders of Ladbrokes Coral plc will pick up 32.7p in cash as well as 0.141 in ordinary GVC shares and also a contingent entitlement of up to 42.8p. That means that the deal is worth an initial amount of £3.2 billion, though it could rise as high as £4 million depending on certain things that I’ll have a look at in a moment. GVC reportedly approached Ladbrokes about a take-over when Ladbrokes was in the final stages of its merger with Coral, so it’s unlikely to have been a surprise to the board.
What Will Shape The Final Price
I mentioned a moment ago that certain things will determine the final outcome of the deal, but what ‘things’ am I referring to? The most obvious one is the impending outcome of the government’s decision on the future of Fixed-Odds Betting Terminals. FOBTs, as they’re known, are controversial machines that are located inside betting shops and have been referred to as the ‘crack cocaine’ of gambling.
The Department of Culture, Media and Sport have been weighing up the future of the machines, with a campaign having been waged for some time to reduce the amount of money that punters are able to stake on them. At the moment the maximum stake is £100, with evidence suggesting that some gamblers have ended up losing thousands of pounds when playing on them. For more information on why some people are so against them, check out the Stop FOBTs website.
Though they haven’t reached a final decision at the time of writing, the government has confirmed that they will be reducing the maximum stake that people can wager from £100 to somewhere between £2 and £50. They are still in the middle of a consultation period over the issue, and whatever the eventual decision the government comes to is it’s likely that the returns of Ladbrokes Coral plc will be hit accordingly. We won’t know the size of the contingent value right will be dictated by the review being carried out by the DCMS.
What Will The New Business Own?
Because of the numerous brands owned by both Ladbrokes Coral plc and GVC Holdings, you might be wondering what brands the final combined business will actually own. Here’s a list:
- Gala Casino
- Gala Bingo
- Gioco Digitale
- Foxy Bingo
- Foxy Casino
It’s interesting to see that the new company will not only be the largest bookmaker in the United Kingdom, but that it will also own two of the largest bingo sites. Both Gala Bingo and Foxy Bingo are immensely popular and now customers of each will be able to benefit from the various facilities offered by each. Little wonder that Kenneth Alexander, the chief executive of GVC, referred to the deal as being ‘a truly exciting prospect’.
What Does The Future Hold For Customers?
In the short-term, not much will change for customers of any of the various brands involved in the takeover. In the long-term, the differences you’ll notice are only likely to be for the better. As John Kelly, the chairman of Ladbrokes Coral plc, said, the merger will ‘improve the customer experience, drive faster online growth and build a more diverse and extensive international portfolio of businesses’.
Certainly the future of the new company is likely to be driven forward by the online side of operations. Though Coral and Ladbrokes between them own around 3,500 shops on the high street and employ over 25,000 staff, it’s the development of the online side of the business that is likely to drive the higher returns. GVC shareholders have used their experience to further the businesses of the likes of Bwin and Foxy Bingo, both of which are online only. As those shareholders will now have a 53.5% stake in the new combined business, they’ll almost certainly keep things going in the same direction.
GVC employs just under 3,000 people across fifteen offices around the world, who will now become part of this larger business. John Kelly believes that this addition of new staff and people with decent business experience can only be a good thing, saying, “The acquisition has compelling strategic rationale allied to an opportunity to use the best of both from proven management teams and will create material shareholder value.” It’s believed that the merger will result in around £100 million a year being saved in costs, which may eventually make its way back to the customer. Certainly if you’re a member of any of the businesses listed above then you don’t need to worry about anything.