ONE thing is certain about any merger proposal between Ladbrokes and Gala Coral if their talks firm up into a deal: there will be a stewards’ inquiry. Such a marriage would form Britain’s biggest bookmaker, leapfrogging the current number one William Hill, with nearly 4,000 high street betting shops.
Ladbrokes is the second-biggest player in retail bookmaking, while Coral is number three. The Competition and Markets Authority (CMA) will be all over such a potential transaction like a badly-fitting suit, and you wouldn’t get long odds on it getting through the regulatory net.
There’s also “previous” here. Ladbrokes, then the market leader, tried to take over Coral back in the late 1990s, but the deal was derailed by British trade and industry secretary Peter Mandelson on the grounds that it would disadvantage punters.
What has changed? Ladbrokes and Coral will argue that the competitive dynamics of the industry have been transformed, with a range of new bookmakers on the block such as Paddy Power, Betfred, Bet365 and Betfair, and far greater use by the public of online betting.
Back in the 1990s, betting with bookmakers was done overwhelmingly in the high street shops or over the telephone.
But in the new expanding digital space, Ladbrokes and Coral are far less dominant, being the sixth and fifth biggest players respectively. It is this argument, above all, they are likely to press with the CMA.
They will probably also argue that consolidation is necessary because of the pressures caused by the likes of the increase in machine gaming duty to 25 per cent from 20 per cent and the recent levy of a point of consumption tax.
However, even with all these arguments, I think Ladbrokes and Coral will still find the regulatory going firm-to-hard.
Everybody knows how the internet has transformed many businesses, but such a merger would still be effectively removing one of the top three. That tends to make regulators twitchy.
Firm and pragmatic
THE latest crackdown on banking bonuses is evidence that regulatory and public dissatisfaction with the industry’s remuneration is not yet spent.
The Prudential Regulation Authority and the Financial Conduct Authority have come up with proposals to extend the period under which bonuses can be clawed back for misconduct for a bank’s top echelon of managers from seven years to ten years.
In addition, the regulators plan to ban bonuses for non-executive directors and senior managers in any bank bailed out by the taxpayer in future.
This all seems very sensible, as is the PRA and FCA’s decision to stay its hand on the idea of banning banker bonus buyouts, whereby a banker’s new employer offers to honour a new hire’s deferred bonuses awarded by their former employer.
These deferred bonuses transferred between banks are a key part of the “golden hellos” top bankers often get when they move berth, and if they were banned it would create an unfair playing field as a prohibition on the transferred bonuses could not be applied to foreign banks.
Instead, the halfway house proposed by the regulators is that bonus buyouts will be ring-fenced so that they are still subject to clawback by a the previous employer.
In all, the regulators have had a good day at the office, fusing firmness with pragmatism.