UK-based gambling rivals Ladbrokes and Gala Coral announced their anticipated merger Friday, a combination that will create Britain’s largest bookmaker. The new company, called Ladbrokes Coral, will have a net revenue of £2.1 billion, EBIDTA of £392 million, and a market cap of £2.3 billion, according to a press release issued by Ladbrokes.
“This is a major strategic step for Ladbrokes which firmly accelerates our strategy to improve the customers’ experience and build recreational scale. Ladbrokes and Coral are two highly complementary businesses, with rich heritage and brand presence across the UK and internationally,” said Peter Erskine, Chairman of Ladbrokes.
He added, “Together, we will create a leading betting and gaming business combining strong brands with an attractive multi-channel offering and an extensive national and international coverage. The transaction will provide an attractive opportunity to generate considerable value for both sets of shareholders, through significant operating synergies and a strong cash flow profile.”
Ladbrokes listed a number of “strategic rationale” for the merger:
- Potential for faster online growth
- The new company will be the UK’s licensed betting office leader
- Further expand its international presence
- Cost synergies estimated at £65 million per year
The two companies confirmed they were in talks about a month ago when Ladbrokes CEO Jim Mullen told RacingPost.com:
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.
William Hill has been the UK’s sports betting leader, with 2,300 betting shops. Ladbrokes is a close second with 2,194, while Gala Coral owns 1,845. Thus…carrying the one…the new Ladbrokes Coral will be far and away the new UK top dog with a total of 4,039 betting shops. Carl Leaver, Gala Coral’s CEO, told The Financial Times that the merged company will likely need to sell some of the betting shops to stay on the good side of the Competition and Mergers Authority. Both the Ladbrokes and Gala brands will remain in place.
To complete the merger, Ladbrokes will issue new shares of the company to Gala Coral shareholders (currently a private company), amounting to 48.25 percent of the new business. Ladbrokes shareholders will own 51.75 percent of the company.
Of course, there is also the issue of who will lead Ladbrokes Coral. In the press release, it was announced that Jim Mullen will be the CEO of the new company while Carl Leaver will serve as Executive Deputy Chairman for twelve months. John Kelly, Senior Independent non-Executive Director of Ladbrokes, will be non-Executive Chairman of the new company and Paul Bowtell, CFO of Gala Coral, will keep that same position at Ladbrokes Coral. The Board will be composed of one non-Executive Director from each of the old companies plus three independent non-Executive Directors.
