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Ladbrokes, Gala Coral Announce Giant $3.4B Merger

British gaming giants Ladbrokes and Gala Coral (formally known as Coral Group) have announced a formal merger of the two companies in a $3.4 billion deal that is set to produce Great Britain’s largest gambling company.  The new firm is to be called Ladbrokes Coral Plc, ending a run of more than a century for the venerable “Ladbrokes” name as a stand-alone entity.

ladbrokes-logoSpecific terms of the merger were announced on Friday in a wedding between two firms that are nearly perfect equals in terms of current gross revenue.  Per the terms of the deal, which still needs approval by the shareholders of both companies, 51.75% of the new company’s outstanding shares will go to existing Ladbrokes shareholders, while the other 48.75% — to be issued in new Ladbrokes Coral stock — goes to the existing Gala Coral owners.

The combined new company will easily become Great Britain’s largest betting company, whether measured by gross wagering volume, physical (land-based) betting shops, or total number of employees.  Formerly, Ladbrokes was only a few hundred shops behind current leader William Hill, but will nearly double of its total betting shops in Great Britain through the deal.

Combined, Ladbrokes Coral will own and operate just shy of 4,000 betting shops in Britain alone, and closer to 5,000 when other shops on the Euro mainland are added in.

The press announcement issued by Ladbrokes gave these primary reasons for the merger, which had been rumored in financial and gaming circles for months.  According to the companies’ official statements, these are the deal’s main takeaways:

Strategic Rationale

  • Potential for faster online growth through leading multi-channel technology, a dual-brand
    strategy enabling effective and efficient cross-brand marketing across a larger customer and
    revenue base.
  • The largest UK Licensed Betting Office (“LBO”) estate which will be strongly cash
    generative, more efficient and sustainable in the long term.
  • An extensive international portfolio of regulated businesses providing a platform for future
    growth with strong retail and online operations in Italy, Belgium and Spain and a rapidly growing
    online operation in Australia.
  • Significant cost synergies of at least £65 million per annum, most of which will be
    delivered in the second year post-merger, underpinning shareholder returns.

Some minor closing of shops and loss of redundant employees is expected; currently, the two companies employ nearly 70,000 people in the UK alone.

Said Ladbrokes Chairman Peter Erskine about the deal, “This is a major strategic step for Ladbrokes which firmly accelerates our strategy to improve the customers’ experience and build recreational scale. Ladbrokes and Coral are two highly complementary businesses, with rich heritage and brand presence across the UK and internationally.”

Added Erskine, “Together, we will create a leading betting and gaming business combining strong brands with an attractive multi-channel offering and an extensive national and international coverage. The transaction will provide an attractive opportunity to generate considerable value for both sets of shareholders, through significant operating synergies and a strong cash flow profile.”

Over at Gala Coral, which Ladbrokes has coveted due to its significantly larger presence in the online market, Chairman Rob Templeman offered the following: “Today’s announcement is testimony to the track record and achievements of the Gala Coral team in delivering a significant transformation of the business over the past four years. This strategic combination is a natural fit and will offer further opportunities for growth. Coral Group’s online strength and high street presence will complement Ladbrokes’ established brand and footprint in the UK and internationally.”

“Together,” added Templeman, “the two businesses will have a strong digital presence with market leading technology, innovation and access to significant resources to drive continued growth and deliver enhanced returns for all shareholders.”

Jim Mullen, Ladbrokes’ current CEO, will handle the same role when the two companies are combined.  Current Gala Coral CEO Carl Leaver may be slated for a “golden parachute” deal down the road.  For now, Leaver will be the combined company’s Executive Deputy Chairman, serving for 12 months after the deal is finalized.

Major gaming-software provider Playtech will also have a stake in the future Ladbrokes Coral Plc, by way of settling its current service deal with Ladbrokes.  Playtech will receive £35 million in cash at some point during the next three years, along with an additional £40 million worth of shares in the new company.  Playtech has also committed to purchasing nearly a fourth of an extra 9.99% of new Ladbrokes Coral stock that will be issued and publicly placed.


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