Ladbrokes and Gala Coral Confirm Ongoing Discussions about Potential Merger
A colossal merger is in the offing, as both Ladbrokes and Gala Coral have confirmed that discussions about a potential merger between them are currently ongoing.
A statement from Ladbrokes quotes CEO Jim Mullen in saying that a Ladbrokes-Gala Coral merger would likely create a consolidated business with considerable scale, and that the potential merger can be expected to generate huge cost synergies; creating value for shareholders of both gambling companies.
CEO Mullen though made it clear that the Ladbrokes board has not yet reached a decision pertaining to the merger transaction, as they have not yet determined if the proposal could be delivered to their shareholders on suitable terms. Nonetheless, the newly appointed Ladbrokes CEO exuded confidence in declaring his aggressive plans for cultivating the company’s recreational customer base, as well as in building the extent of its digital business. CEO Mullen expressed eagerness to present his plans to Ladbrokes shareholders. He added that if the results of merger discussions indicate success, he intends to defer presenting his proposal of carrying out the strategic review slated on June 30, 2015.
The Gala Coral Group conveyed a similar view stating that merging with Ladbrokes is deemed as having powerful accretive value for Coral and Ladbrokes shareholders alike. Although Gala Coral has been unloading its bingo club assets, the company gave no assurance that the Ladbrokes-Gala Coral talks will result to any merger agreement. The company asserts in the statement that The Group remains secure with the knowledge that on its own, Gala Coral still possesses highly attractive potential for future business success.
Based on reports, a Ladbrokes-Gala Coral consolidation will bring together under one betting company almost 4,000 high-street betting offices in Great Britain. Many believe that with Ladbrokes as the second largest sports betting business in the UK, and Gala Coral as the third, the proposed unification would place the two companies in a better position when weathering the effects of the new UK Gambling Tax regime. Others also perceive that if the two major British gambling companies agreed to combine, the deal would create a betting entity large enough to compete strongly against UK’s largest betting company, William Hill.
According to the Financial Times, the ongoing discussion is still in the preliminary stage, with issues about corporate structure and price still on the table before any merger agreement could be finalised. It has been established that Gala Coral’s 132 Bingo Clubs will not be part of the merger discussions. Ladbrokes is said to be proposing the creation of a new entity that will seek listing with the London Stock Exchange, as this would allow the new betting company to offer shares and raise funds to boost the balance sheet figures. If Ladbrokes’ proposal pushes through, the deal would see the privately owned Gala Coral Group taking over Ladbrokes, the latter being a publicly traded company.
Actually, it is Ladbrokes’ second attempt to merge the Gala Coral Group’s business into its own. The first was in 1989, when it tendered £363 million to buy the company from Coral’s former owner, the Bass Brewery. However, the deal came at a time when a sport betting as a business was still relatively new. The government saw it fit not to approve the Ladbrokes-Coral takeover on the premise that it would put British punters at a disadvantage, if competition were confined between Ladbrokes and William Hill.
