Ladbrokes Coral shares soar on GVC takeover approach

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GVC, which owns Sportingbet and Foxy Bingo, has put forward a cash-and-shares offer valuing Ladbrokes at 160.9p a share, with additional loan notes worth 42.8p a share.

Ladbrokes completed its £2.3bn merger with Coral in November previous year, but it is understood GVC first approached Ladbrokes over a tie-up when it was finalising the deal.

GVC Chief Executive Kenneth Alexander is expected to head up the combined group, although this has yet to be finalised and may change over the coming weeks.

A statement on the latest potential deal said the companies were "in detailed discussions regarding the possible combination of the two businesses". The enlarged entity would be "an online-led, globally-positioned betting and gaming business that would benefit from a multi-brand, multi-channel strategy applied across some of the strongest brands in the sector".

It would lead to Ladbrokes Coral shareholders owning about 46.5% of the combined group and GVC about 53.5%.

Last month, GVC announced the sale of its Turkish subsidiary, removing a potential obstacle to a deal with Ladbrokes, which had raised this as one sticking point during August's talks. Ladbrokes Coral, whose traditional betting shops in the U.K.'s town centers are fading, would get more exposure to the expanding digital gaming business, while GVC could reach more potential customers for its online platforms.

Wilson suggested that if the triennial review sees the government tightens the rules somewhat but stays short of imposing a £2 stake limit on betting machines, this could see the offer for LCL rise to somewhere in excess of 180p, "which looks a healthy premium given the regulatory overhang".

It would also get a potential further value of up to 42.8p, depending on the outcome of the United Kingdom government's Triennial Review into fixed-odds betting terminals (FOTBS) and its impact on profits.

Any transaction would also enhance the enlarged group's position in a number of the world's largest regulated online gaming markets, including the UK, Italy and Australia, and would significantly increase GVC's current share of revenues from locally regulated/taxed markets to more than 90 percent.

Isle of Man-based GVC said it expects the transaction will be "double digit" earnings per share accretive from the first full year following completion and after the results of the Triennial Review, even if the maximum bet on FOTBs is set at £2. GVC shareholders would be entitled to the rest.

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