Merger to trigger Ladbrokes revival?

Switch on the television nowadays and viewers are inundated with a barrage of betting adverts.

Whether it is Ray Winstone telling them to "av a bang on that [sic]" or a chauffeur describing betting as getting "the closest to the game", our televisions seem to be awash with these adverts. Premier League football matches broadcast live on Sky have to cram in a betting ad in the 30 seconds before kick-off just to remind everyone to have a flutter during the game.

It is now easier than ever before to place bets. With bookmakers creating apps for smartphones and tablets alongside their online offering for computer and laptop users, punters can place a bet around the clock on any sport they fancy. It would seem that bookmakers are thriving in this newfound betting environment.

However, flashback to February 2015 and high street bookmaker Ladbrokes announced that it would be closing 60 UK shops following a significant fall in pre-tax profit in 2014. The company revealed that profits fell from £68 million to £38 million in the space of 12 months. It blamed "regulatory headwinds" combined with a poor Boxing Day for its slump.

This prompted a change in approach from Ladbrokes with the company now looking to focus on digital and international growth. During the same period in which its profits dropped to £38 million, it had seen a 23 per cent increase in revenue. Ladbrokes is now looking to make a further step in the right direction with the announcement of a potentially groundbreaking deal.

The company confirmed on Tuesday (June 23rd) that it was in talks with Gala Coral Group about a potential merger of the two organisations. It is the second time Ladbrokes has attempted to join forces with Coral. In 1998, it had outlined a bid to buy its rival but was stopped by the government which had concerns over a reduction in competition.

At the time, the then Trade and Industry Secretary Peter Mandelson said the transaction could lead to a "weakening of price competition at the national level" and reduce consumer choice. The verdict resulted in Ladbrokes backing down. However, it is now back to discuss merger options with Coral.

Jim Mullen, Ladbrokes chief executive, explained: "A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies' shareholders."

Despite his positivity about the deal, Mr Mullen maintained that there was no certainty that the initial talks would lead to an agreement. Ladbrokes and Coral are still to pin down possible terms and timings and it is expected to be a long process.

Mr Mullen also explained that Ladbrokes' board is still to decide whether or not a merger with Coral would be "strategically attractive". It is considering if it could be "delivered to shareholders on appropriate terms" and this positioning could potentially mean that the talks are postponed while a decision is made.

Should the merger go ahead it would be classified as a reverse takeover of Ladbrokes.


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