Ladbrokes, Gala Coral merger on the cards

The market value of Ladbrokes took a whopping great leap yesterday after news surfaced of a possible merger with Gala Coral Group.

At one stage in day Ladbrokes shares were up 20%, adding over £150 million to the company’s market cap, on confirmation that merger talks were under way.

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Ladbrokes PLC share price in Pence Sterling. Source: ft.com

A Ladbrokes’ statement released yesterday said,

“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,” 

If the merger does go ahead, the combined entity would become a UK force to be reckoned with both terrestrially and digitally. Its 4,000 betting shops would comprise almost half the entire UK market (this could raise competition authority issues), and it would hold almost 15% of the digital market, rivaling William Hill for the number 2 spot (bet365 number 1).

Laddies have been trying hard to close the gap with rival William Hill in the online space for some time now, unsuccessfully on the  acquisition trail for a period before partnering up with Hill’s old bed fellows Playtech. The gap is still considerable, but this merger would wipe it overnight.

As a point of interest, way back in 1998, when Google was a name known by only the nerdiest of nerds, Ladbrokes tried to buy Coral for £363 million. The purchase was blocked by regulators for because of competition concerns. Since then Coral and Gala merged, then in 2010 almost collapsed under £2.5 billion of net debt before a handful of private equity firms including Apollo Global Management, Cerberus Capital Management and Anchorage Capital Partners took over the company.

There was talk earlier in the year of a possible Gala Coral IPO, expected to value the company at around £2 billion.

2015: the year of consolidation

2015 has been a very busy year for investment bankers working in the online gambling space. In addition to the Ladbrokes/Gala deal, Bwin.Party takeover talks involving Amaya and 888 are still bubbling away. And back in February William Hill had an unsuccessful crack at 888.

There was speculation last year that the UK’s new point of consumption tax would lead to rationalization in the industry. Seems that speculation was spot on.

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