Ladbrokes Coral surges on GVC takeover bid

Ladbrokes Coral surges on GVC takeover bid

On Thursday, they said GVC had made a non-binding cash and shares offer to Ladbrokes, with the final price determined by the outcome of the government's review into gambling machines in United Kingdom betting shops, which could hit profits at the target company.

The Ladbrokes Coral Group PLC (LON:LCL) (LCL.L) share price has risen 25% today after it announced that it is in detailed discussions regarding a potential combination with GVC Holdings PLC (LON:GVC) (GVC.L). GVC shareholders would be entitled to the rest.

In a joint statement, the two firms said GVC's chief executive Kenneth Alexander would be the boss of the enlarged group.

"GVC coming in before knowing the outcome of the all-important government review into the industry was probably an outside bet, ' said George Salmon, equity analyst at Hargreaves Lansdown, pointing to the 'significant chunk" of Ladbrokes Coral revenues from FOBTs.

The review is part of a government crackdown on FOTBs after MPs raised concerns the machines were too addictive and fuelled problem gambling.

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"The enlarged group would be an online-led globally positioned betting and gaming business that would benefit from a multi-brand, multi-channel strategy applied across some of the strongest brands in the sector", the companies said.

GVC said it expects the deal would results in "material synergies which will create value for both sets of shareholders" and that it will increase earnings per share by a double-digit rate from the first full year post-completion. Current rules limit maximum stakes on these machines to £100, but this could be slashed to as low as £2.

Based on a closing GVC price overnight of 911.5p and 135.65p for Ladbrokes, the offer would values Ladbrokes Coral at £3.1bn or 160.9p per share, with the CVR of up to 42.8p per share potentially taking the total value up to £3.9bn.

Based on the terms laid out, both parties anticipate that Ladbrokes Coral shareholders would hold a stake of around 46.5 per cent in the enlarged business, with GVC shareholders holding 53.5 per cent. Last year GVC bought Btwin.party, while Ladbrokes and Coral merged.

"GVC's recent move to exit Turkey cleared the last barrier and LCL shareholders should be pleased to see the firm is now better insulated against the vagaries of the United Kingdom market", said Neil Wilson, senior market analyst at ETX Capital.

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