Betting firms Ladbrokes and Gala Coral have agreed a mega-merger to create a £2.3 billion gambling giant, though there may be some hurdles to overcome.
The combined business is expected to overtake William Hill as the biggest bookmaker in the UK, although it is expected to have to sell some stores to satisfy any concerns about the deal from competition regulators.
Yesterday’s move brings together 2,100 shops from Ladbrokes and 1,845 from Coral. Talks about the merger were first made public last month.
Ladbrokes Coral will have net revenues of some £2.1bn and underlying earnings of £392 million, while the deal is expected to bring savings of about £65m a year.
The firms said the business would be the largest licensed betting concern in the UK, which would be “more efficient and sustainable in the long term”.
Ladbrokes chairman Peter Erskine told investors: “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.
“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.”
Jim Mullen, chief executive of Ladbrokes, will retain the position at the new business while Gala Coral boss Carl Leaver will be executive deputy chairman for 12 months after completion of the deal.
The announcement came as Mullen said Ladbrokes was embarking on an “urgent, overdue and essential” three-year investment programme to boost revenues in its shops and grow its online business.
He warned that it would mean operating profits for the current year £20m lower than expected and slashed the full-year dividend to 3p, down from 8.9p the year before.
Ladbrokes released a half-year trading update showing operating profits down 38.2 per cent to £41.7m as Mullen said “results have continued to favour our customers”.
Meanwhile it is placing 92 million new shares representing up to around 10 per cent of the company with new and existing investors to boost the balance sheet of the enlarged group.
Under the merger, both brands will continue to operate separately, “enabling us to give our existing loyal customers a consistent experience with the brands they favour, whilst providing additional products and best operating practices to both brands”.
The planned merger includes Coral Retail, the UK bookmaking business, Gala Coral’s 870-strong Eurobet division in Italy and Coral’s online arm, but not the 132-site Gala bingo business.
Existing Ladbrokes shareholders will own just over half of the new company with shares issued to Gala Coral investors representing the remaining stake.