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GVC Holdings Could Acquire Ladbrokes Coral by July
- February 12, 2018 By Oliver Young -
Companies often respond to legislative changes that incur new costs by merging and joining forces. Merging with another company in the same industry allows management to cut overhead costs which can be vital, especially in times when there’s a rise in legal or other costs, or when profits suffer.
2015 was marked by two large mergers. In the summer, Ladbrokes acquired Gala Coral creating a new entity Ladbrokes Coral that was estimated at £3.5 billion, thus becoming one of the largest UK gambling operators. Then, later that year, Paddy Power and Betfair announced their decision to merge. The new company employed a dual strategy for the European market, which allowed them to cut costs, while simultaneously using the reputation of both brands to attract new customers.
The Deal Could be Worth up to £4 Billion
The two large mergers didn’t cause any visible significant changes, things remained pretty much the same for all customers. Experts predicted that mergers and merger attempts aren’t going to stop and that new deals can be expected in the upcoming years. Now, it seems that Ladbrokes Coral might be in a participant in yet another merger. As early as last year, GVC Holdings announced its plans to purchase Ladbrokes Coral.
The deal proposal will have to be reviewed by the Competition and Markets Authority (CMA) and if they give the nod, it will be completed this year. It is estimated that GVC is willing to pay an amount up to £4 billion, although some suggest that the amount would be lower at least by few hundred million.
The merger will surely be beneficial for both entities, and the intention is to cut costs by reducing overhead and the total number of employees. It is estimated that about 6% of the combined workforce of both companies will be out of work and most of them will be UK employees. Considering that the combined number of employees of both companies is about 26,800, it can be expected about 1,600 to be sacked. However, Ladbrokes have stated that the cuts will not affect their betting shops. Ladbrokes currently operates more than 3,500 betting shops throughout the UK.
CMA Approval by April
Ladbrokes agreed to a merger in December last year and the financial estimate of the company’s value was between £3.2 and £4 billion. It is expected that the Government decision on fixed odds betting terminals which can be announced any time now, will have an impact on the company price, as significant proportion of the company’s revenue comes from FOBTs. Considering that the Government intends on decreasing the FOBTs wagering limit to as low as £2, it won’t be surprising if the price estimate goes down to £3.2 billion, since Ladbrokes owns more FOBTs than each of the other operators.
The CMA will keep collecting information on the proposed deal by February 21, and then they will proceed onto reaching a decision which will be announced in April. If everything is alright, the two companies will form a new entity by the end of the first half of 2018. If it goes through, the merger will create the largest UK gambling company.