GVC, Ladbrokes Coral Merger Talks Collapse



According to a Wednesday report in the Financial Times (FT), GVC Holdings PLC, the parent company of partypoker, attempted to acquire UK bookmaker Ladbrokes Coral during the last few weeks, but had its offer declined.

FT says that its two sources close to the situation, GVC set the value of Ladbrokes Coral at 140p per share, which equates to a total of £2.7 billion. GVC was willing to add an additional premium of 50p per share, bringing the offer price to £3.6 billion.

That 140p per share price was itself about a 20p per share premium over Tuesday’s market price of 119.6p per share.

This is the second time that GVC has attempted to woo Ladbrokes Coral to form a gaming giant. Late last year, GVC reportedly (again, it was the Financial Times that was on top of it) offered £3.2 billion to Ladbrokes Coral Group, mostly in the form of stock. Talks ended in mid-December.

Both companies have been central figures in the consolidation of the gambling industry in recent years. In September 2015, GVC Holdings purchased partypoker’s parent company, bwin.party, for £1.116 billion.

Ladbrokes Coral was also formed in 2015 by a merger of former rivals Ladbrokes and Gala Coral. At the time, Gala Coral was a private company and Ladbrokes was publicly traded. To complete the deal, Ladbrokes issued shares of the new company (publicly traded, as well) to Gala Coral shareholders. At the time of the merger, Ladbrokes shareholders held slightly more of the company, 51.75 percent. The deal was estimated to be worth £2.3 billion.

The Financial Times said that the talks between GVC Holdings and Ladbrokes Coral have been scuttled for a couple possible reasons, “….including disagreement over the value of the companies, an issue exacerbated by the uncertainty surrounding the UK government’s review into the gambling sector that is expected to be released this autumn.”

One of the changes expected to be enacted by the UK government, says the FT, is an adjustment on gaming machines called fixed-odds betting terminals (FOBTs), basically video gambling machines with games like roulette, bingo, slots, and simulated horse racing. In the UK, betting shops are all over the place and FOBTs are quite accessible to people of all financial means. They are often criticized for taking advantage of those who either cannot afford to be gambling, are gambling addicts, or both.

The minimum bet is £1 on an FOBT and the maximum is £100.

“Some British MPs and activist groups such as the Campaign for Fairer Gambling have argued that maximum stakes on FOBTs should be slashed from up to £100 to £2,” states the Financial Times. “Should this happen, Barclays, the bank, estimates that Ladbrokes Coral would lose £449m in machine revenues in 2018.”

This uncertainty would certainly be an understandable reason why GVC and Ladbrokes Coral may have been hesitant to ink a deal, as it would change the potential value of the new company.

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