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| Ladbrokes and Gala Coral merger to create £2.3bn gambling giant | Ladbrokes and Gala Coral merger to create £2.3bn gambling giant |
| (about 4 hours later) | |
| Betting firms Ladbrokes and Gala Coral have unveiled a long-awaited deal to create a £2.3bn gambling giant, the biggest bookmaker in the UK. | Betting firms Ladbrokes and Gala Coral have unveiled a long-awaited deal to create a £2.3bn gambling giant, the biggest bookmaker in the UK. |
| The move, which comes nearly two decades after a similar merger proposal failed, also handed Andy Hornby, the former boss of failed bank HBOS, a senior role in the new business. | The move, which comes nearly two decades after a similar merger proposal failed, also handed Andy Hornby, the former boss of failed bank HBOS, a senior role in the new business. |
| With nearly 4,000 betting shops and 30,000 employees, the combined group is set to overtake William Hill as Britain’s biggest bookmaker, although it will have to sell some outlets to satisfy any concerns from competition authorities. It will be called Ladbrokes Coral and will be listed on the London stock exchange, with both brands set to stay on the high street. | With nearly 4,000 betting shops and 30,000 employees, the combined group is set to overtake William Hill as Britain’s biggest bookmaker, although it will have to sell some outlets to satisfy any concerns from competition authorities. It will be called Ladbrokes Coral and will be listed on the London stock exchange, with both brands set to stay on the high street. |
| Hornby, who was chief executive of HBOS when the bank almost imploded in 2008 and was rescued by Lloyds Banking Group, has been appointed chief operating officer of Ladbrokes Coral and is expected to pick up a large bonus. He will not sit on the board, however, after pressure from shareholders. | Hornby, who was chief executive of HBOS when the bank almost imploded in 2008 and was rescued by Lloyds Banking Group, has been appointed chief operating officer of Ladbrokes Coral and is expected to pick up a large bonus. He will not sit on the board, however, after pressure from shareholders. |
| Along with other HBOS directors, Hornby was condemned by the parliamentary commission on banking standards in 2013 for mistakes that led to the bank’s “colossal failure”. They are likely to come under fire again when a long-awaited regulatory report into HBOS is published. | Along with other HBOS directors, Hornby was condemned by the parliamentary commission on banking standards in 2013 for mistakes that led to the bank’s “colossal failure”. They are likely to come under fire again when a long-awaited regulatory report into HBOS is published. |
| The bosses of Ladbrokes and Coral dismissed any concerns about Hornby’s appointment. Jim Mullen, chief executive of Ladbrokes since March who will run the merged group, said: “Andy Hornby is a first-class executive that this combined group is lucky to have.” | The bosses of Ladbrokes and Coral dismissed any concerns about Hornby’s appointment. Jim Mullen, chief executive of Ladbrokes since March who will run the merged group, said: “Andy Hornby is a first-class executive that this combined group is lucky to have.” |
| Ladbrokes, which boasts a 136-year history, has struggled to to embrace the internet in the same way as rivals William Hill and newer rivals such as Paddy Power and bet365, and hopes to catch up by joining forces with private equity-owned Coral. | |
| Ladbrokes, a FTSE 250 company, will issue new shares to the shareholders of Coral representing 48.25% of the company, with Ladbrokes shareholders owning 51.75%. | Ladbrokes, a FTSE 250 company, will issue new shares to the shareholders of Coral representing 48.25% of the company, with Ladbrokes shareholders owning 51.75%. |
| The deal will bring together 2,100 shops from Ladbrokes and 1,845 from Coral, ahead of William Hill’s 2,300 stores. Talks about the merger were first made public last month. The new group will have revenues of £2.1bn and underlying profits of £392m. The deal is expected to bring savings of £65m a year, largely by removing duplication in the back office. | The deal will bring together 2,100 shops from Ladbrokes and 1,845 from Coral, ahead of William Hill’s 2,300 stores. Talks about the merger were first made public last month. The new group will have revenues of £2.1bn and underlying profits of £392m. The deal is expected to bring savings of £65m a year, largely by removing duplication in the back office. |
| Gala Coral boss Carl Leaver, who will be executive deputy chairman for 12 months, said there will be no shop closures, and any stores that have to be disposed of for competition reasons will be sold as a going concern. He did not give any details on potential job cuts, beyond saying: “I can’t sit here and say that there will be no job losses.” | Gala Coral boss Carl Leaver, who will be executive deputy chairman for 12 months, said there will be no shop closures, and any stores that have to be disposed of for competition reasons will be sold as a going concern. He did not give any details on potential job cuts, beyond saying: “I can’t sit here and say that there will be no job losses.” |
| The popularity of high stakes betting machines has helped give a fresh lease of life to betting shops in the face of tightening government regulation and rising tax pressures. The merged company views such retail business as its cash engine. | The popularity of high stakes betting machines has helped give a fresh lease of life to betting shops in the face of tightening government regulation and rising tax pressures. The merged company views such retail business as its cash engine. |
| In 1998, a similar merger proposal was vetoed by the then business secretary Peter Mandelson, who said a tie-up was not in the consumer interest. However, that ruling came before online gambling exploded, allowing many other players to take a slice of a much bigger market. | In 1998, a similar merger proposal was vetoed by the then business secretary Peter Mandelson, who said a tie-up was not in the consumer interest. However, that ruling came before online gambling exploded, allowing many other players to take a slice of a much bigger market. |
| Analysts at Stifel said: “The Coral transaction should provide considerable benefits for Ladbrokes’ shareholders, but this assumes that competition issues can be satisfactorily resolved, which is a big ‘if’.” | Analysts at Stifel said: “The Coral transaction should provide considerable benefits for Ladbrokes’ shareholders, but this assumes that competition issues can be satisfactorily resolved, which is a big ‘if’.” |
| Ladbrokes also reported first-half operating profit in line with expectations but said increased marketing investment would dent 2015 operating profit by £20m, pushing guidance down to £70m-£75m for the year. | Ladbrokes also reported first-half operating profit in line with expectations but said increased marketing investment would dent 2015 operating profit by £20m, pushing guidance down to £70m-£75m for the year. |
| Analysts at stockbroker Jefferies warned that it was a make-or-break deal for Ladbrokes, which has postponed announcing the outcome of a strategic review while it thrashed out a deal. Jefferies analyst Ian Rennardson said: “We think Ladbrokes is in the last chance saloon, having today announced a profit warning, a dividend cut, a share placing and an intended merger. | Analysts at stockbroker Jefferies warned that it was a make-or-break deal for Ladbrokes, which has postponed announcing the outcome of a strategic review while it thrashed out a deal. Jefferies analyst Ian Rennardson said: “We think Ladbrokes is in the last chance saloon, having today announced a profit warning, a dividend cut, a share placing and an intended merger. |
| “We remain sceptical about the merits of the strategic review and proposed merger with Gala Coral, and see gamblers as the only beneficiaries of what could prove to be a marketing ‘race to the bottom’.” | “We remain sceptical about the merits of the strategic review and proposed merger with Gala Coral, and see gamblers as the only beneficiaries of what could prove to be a marketing ‘race to the bottom’.” |