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Ladbrokes 2 3 million merger with Coral

Article By: ,  Financial Analyst
August 11, 2015 7:36 PM

Two major UK gambling companies have announced a merger – and experts believe this could be just the beginning of an industry transformation.

Ladbrokes' £2.3 merger with Coral is likely to be the first of a number of similar deals as companies face tougher regulations and higher taxes, according to Jim Mullen, chief executive of Ladbrokes.

"The operators will need to be far more efficient," he explained.

"I think this merger with Coral is probably the start of consolidation in our sector. I wouldn't be surprised if you see some more," he added.

There are still a number of challenges to get past if the deal with Coral is to go through. They need to gain shareholder approval and also get a green light from the Competition and Markets Authority (CMA). Since the merger would create the biggest company of betting shops in the UK, it's expected that the CMA will demand store disposals in order to prevent competition concerns. There's also the chance that the regulator could block the deal completely.

Mr Mullen confirmed that the two companies had "formally been in touch" with the watchdog, but the CMA had not yet provided feedback on the deal. So far, Ladbrokes has spent £3.8 million on the merger.

He also pointed out that until the deal is completed, the two companies will remain competitors.

"We'll be looking to basically beat them in all products we compete in," he said.

Financial results

In the six months to June, Ladbrokes saw a £51.4 million pre-tax loss – that's compared to a £27.7 million profit during the same period a year earlier. The main reason for this was a £58.3 million impairment charge after Mr Mullen wrote down the value of the Ladbrokes' shop estate and obsolete software.

He has laid out plans to boost online customers as part of a three-year investment plan and has said he doesn't expect profits to grow until 2017.

Other potential deals

Online gambling companies 888 and GVC are currently competing to buy Bwin.Party. The Telegraph reports that this has escalated into a £1 billion takeover battle.

This confirms Mr Mullen's prediction that further consolidation in the industry is "inevitable". He also said that the gambling sector will "be a different landscape in five years' time".

At 16:30 BST, shares in Ladbrokes were down 1.82 per cent to 108.00p.

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