It has emerged today that Ladbrokes has entered into merger talks with the Gala-owned Coral Group, which, should it go ahead, would create the largest bookmaker currently operating in the UK.
Although the talks would not affect Gala’s 132 bingo halls, the resulting business would control almost 4,000 outlets in the UK – 2,100 of which are presently operated by Ladbrokes and 1,845 by Coral.
Ladbrokes chief executive Jim Mullen was due to present his highly anticipated strategic review of the business on the 30th of this month, yet due to the talks this is likely to be postponed. However, he maintains that the business has a good chance of elevating profits in the coming years with or without a merger with Coral.
He says; “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.
“Since becoming chief executive, 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.”
Should a deal be agreed, the business would overtake William Hill as the country’s largest bookmaker by quite some way and the negotiations, therefore, have attracted the attention of the competition authorities.
Analysts have so far theorised that, in order to gain approval, the respective boards may have to dispose of up to 15 per cent of their combined high street premises, resulting in numerous job losses and a significant reduction in their town centre presence.
This is not the first time that the companies have faced scrutiny over a potential deal, as in 1998 Ladbrokes attempted to buy the smaller Coral Group. However, the move was blocked by then-trade and industry minister Peter Mandelson, as he claimed the resulting group would have a negative effect upon high street competition.
Earlier this year, Ladbrokes reported a fall in pre-tax profit from £68 million to £38 million during 2014, reflecting the impact both the new gaming machine regulations and the growth of online betting has had on the industry. As a result, the firm revealed an intention to close up to 60 outlets this year – something which is expected to go ahead regardless of the outcome of the present discussions.
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