British betting and gaming company Ladbrokes plc has agreed on a merger deal with its former rival Gala Coral, the companies announced on Friday, July 24. The operation will lead to the creation of a $3.4 billion business to be carried under a new company named Ladbrokes Coral.
Ladbrokes' current shareholders will own 51.75 percent of the new business, while Gala Coral's shareholders — which include private equity funds Anchorage Capital Partners and Apollo Global Management — will control the remaining 48.25 percent.
As announced on Friday, the new company will be led by Jim Mullen, who currently serves as Chief Executive Officer for Ladbrokes and will keep today's Gala Coral Chief Executive Officer Carl Leaver as Deputy Chairman for at least 12 months.
Founder of Gala Coral Group Limited and currently Senior Independent non-Executive Director of Ladbrokes, John M. Kelly will become Ladbrokes Coral non-Executive Chairman, while Gala Coral Chief Financial Officer Paul Bowtell will maintain his position also in the new company.
Ladbrokes also explained that the deal will be funded by issuing 93 million new shares, which represent 10 percent of the company.
"This is a major strategic step for Ladbrokes, which firmly accelerates our strategy to improve the customers' experience and build recreational scale," Ladbrokes Chairman Peter Erskine stated as the deal became public. "Ladbrokes and Coral are two highly complementary businesses, with [a] rich heritage and brand presence across the U.K. and internationally.
"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 synergies and strong cash flow profile."
The combination of Ladbrokes' and Gala Coral's businesses will also lead to the creation of Britain's biggest bookmaker, as the deal brings together the 2,100 shops owned by Ladbrokes and the 1,845 owned by Coral. To date, however, it isn't clear yet what the final number of the betting shops will be upon completion of the merger, as cost-cutting operations and regulations imposed by Britain's Competition and Markets Authority (CMA) are bound to lead to the closure of a number of the existing betting shops.
"Both Ladbrokes and Gala Coral are confident that the merger is deliverable and are committed to working closely with the CMA in its reviews," the two companies stated on Friday. "It is anticipated that the combined entity will need to dispose of retail stores to satisfy CMA requirements."
Despite the closure of a yet-to-be-determined number of betting shops, Ladbrokes and Gala Coral believe that the company created with the merger will still be Britain's biggest bookmaker with a significant advantage over William Hill, which is today's largest bookmaker in the U.K with a network of over 2,360 licensed betting shops across the country.
"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," Gala Coral Chairman Rob Templeman said. "This strategic combination is a natural fit and will offer further opportunities for growth. Coral's group online strength and high street presence will complement Ladbrokes' established brand and footprint in the U.K. and internationally."
Templeman added, "Together, 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 return for all shareholder."
Sports-betting shops aside, the newly-created Ladbrokes Coral will try also to increase its footprint in the online gambling industry, which to date is supposed to account for approximately 20 percent of Ladbrokes' and Gala Coral's combined revenues.
As for its footprint in the international regulated markets, the new company will immediately be active in the U.K., Belgium, Spain, and Australia through the licenses already owned by Ladbrokes. Also, Ladbrokes Coral will be present in Italy, where Gala Coral currently operates Eurobet Italia, an online gaming hub that offers sports betting, casino gambling, and online poker through iPoker, Italy's second-biggest poker network. The operations from regulated markets are supposed to account for approximately 11 percent of Labrokes Coral's revenues.
Image courtesy of The Guardian