The owners of Bwin and PartyPoker, GVC Holdings, are in negotiations with the gambling giant, Ladbrokes Coral for a potential takeover worth £3.9 billion. After the third round of negotiations, both parties are confident that they will manage to reach an agreement. Ladbrokes Coral has been a subject of takeover talks by Paddy Power Betfair, 888, Rank Group Plc, and William Hill in the past. These potential gambling mergers were on hold until the final outcome of the Government review on Fixed Odds Betting Terminals. However, as GVC’s CEO Kenny Alexander hinted, they were the ones who took action into their hands because it was ‘too tempting’ for them to wait.
Ladbrokes and Gala Coral merged in 2016 to form Ladbrokes Coral, a move which cost £2.3 billion. Now, although GVC values Ladbrokes Coral at £3.1 billion, they are prepared to go as high as £3.9 billion for its shares. This deal also depends upon the Government’s review on Fixed Odds Betting Terminals; the Government is expected to review the maximum bet allowed on the terminals. At the moment players can place bets up to £100, but with the reviews – it is expected that the maximum bet allowed will range between £2 and £50. Ladbrokes Coral makes a good profit from Fixed Odds Betting Terminals, as it has 3,500 street bookmakers. These profits could be reduced if the Government comes down harsh on the maximum bet size. According to the experts, the maximum bet could be £20.
GVC’s propose is to pay 160.9 pence per share which is a premium of 18% based on the Ladbrokes Coral share price. However, it’s possible that GVC raise their offer to 203.8 pence per share, depending on the regulatory review outcome. The second offer would be 50% premium, and the Ladbrokes Coral board will probably find it hard to turn such an offer down.
The takeover will be completed by cash and shares mixture. The initial offer is 32.7 pence in cash and 0.141 GVC shares for each Ladbrokes Coral share. Depending on the outcome of the Government review, the Ladbrokes investors may receive extra 42.8 pence per share.
GVC’s Market Capitalisation stands at £2.7 billion, while Ladbrokes Coral enrols £3.283 billion. When the takeover is complete, the merger company would be estimated at £6 billion. The company would become the second largest gambling company right after the largest gambling company and one of the best UK betting and poker sites, Paddy Power Betfair, which is valued at £7.179 billion.
In the past, GVC has had a large exposure to the ‘grey’ markets, but with the upcoming merger, the larger part of the revenue will come from regulated markets. The formal offer is due January 4th, and after the subsequent shareholder vote, the deal is expected to be finalised in the summer.