Ladbrokes, Gala Coral Merger Talks Heat Up

A long-rumored merger between European bookmaking powerhouses Ladbrokes and Gala Coral is back on the front burner, with the two companies recently issuing a public acknowledgment that talks are continuing.

In the latest developments, publicly traded Ladbrokes PLC found it necessary to issue a statement a week ago via the London Stock Exchange to address the various rumors and potential volatility in its stock.  Laddies, which trades as LAD on the London exchange, confirmed that “it is in discussions with the board of Gala Coral Group Limited (‘Gala Coral’) regarding a possible merger of Ladbrokes and Coral Retail, Eurobet Retail and Gala Coral’s Online businesses.”

The possible merger would create an “enlarged business” which would continue to be traded on the London Stock Exchange, whether as Ladbrokes or under a changed or unified name.  Financial news outlets in London and New York pegged the value of the possible merger at about £2.1 billion, or about USD $3.3 billion.  In addition to the Gala Coral online family of sites, the deal would include Gala Coral’s chains of sports betting shops and phone-bank services for same, in both the UK and Italy, offered under the Coral Retail and Eurobet Retail names.  Gala Coral’s sizable online and live bingo-and-casino business, branded as Gala Bingo and Gala Casino, is not currently part of the deal being negotiated.

Following the announcement of the ongoing talks, Ladbrokes cancelled a business review presentation scheduled for shareholder and investor consumption, which had been initially scheduled for June 30th.  No rescheduling of the planned presentation has occurred.

Ladbrokes is eyeing the Gala Coral brands as a way of strengthening its already strong presence in the UK, while increasing its access in Italy, where Gala Coral is a major player via its Eurobet licenses.  Eurobet’s football betting service currently holds a 14% market share in that niche, according to the statement released by the two companies.

The Gala Coral conglomerate is owned by several capital-investment groups, including Anchorage Capital Partners, Apollo Global Management, Cerberus Capital Management and Park Square Capital.  Apollo Global Management is well known in the gambling industry for its failed leveraged buyout, while partnering with TPG, of Harrah’s Entertainment (now Caesars) back in 2006.  That buyout occurred just before the housing and investment bubble collapsed last decade and left Caesars mired under a mountain of debt, leading to that gambling giant’s bankruptcy filing in the US earlier this year.

Ladbrokes CEO Jim Mullen offered a brief quote about the possible merger — which seems quite likely given the acknowledged depth of the talks — as a way of keeping Laddies “sustainable” and viable for the long term.  Said Mullen:

“Since becoming CEO my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced and I look forward to presenting them to shareholders.

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.

The Board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms.”

Ladbrokes’ share price spiked by 10% following the June 22nd announcement, though the company’s shares have drifted lower over the past week, giving back about half of that gain.

Whether Mullen’s talk of “synergies” means the possible elimination of part of both companies’ work forces and closing of some retail shops remains to be seen, in the event the deal does indeed go forward.  The two companies are nearly identical twins in terms of overall business volume; Gala Coral is just a few percent larger, globally, owing largely to its Italian-market presence.  Ladbrokes’ sports-betting presence in the UK currently outstrips that of the Gala Coral brands.  Together the two companies employ nearly 30,000 workers, the majority of those workers currently in Great Britain.