Ladbrokes and Gala Coral – New Gambling Giant
The year-long battle seems to be coming closer to an end with the Competition and Markets Authority (CMA) announcing it is fast-tracking its investigation into the deal. If it is to go ahead, the two giants of the gambling business will form an entity with over £2.1bn in revenues. The new name will be Ladbrokes Coral. This is not the first attempt for the two companies to merge – Ladbrokes tried to buy Coral back in 1998 but the deal didn’t go through on competition grounds, similar to the present case.
The first phase of the CMA investigation was entered on 16th of December and ended to commence the second around 25 days ahead of schedule, due to pressure put from both interested parties. According to CMA officials, the merger “may lead to a worsening of their offer to customers” where the physical venues of the two bookmakers are overlapping in terms of coverage. This is why a detailed investigation was launched to look in close detail at those and some other competition concerns. The now launched phase two of the investigation will be overseen by a team combining a group of independent experts and CMA staff. The final decision is said to be reached by the 24th June this year. If the deal was to be given a green light, the CMA will likely add a condition for the newborn company to sell between 250 – 1,000 of their shops.
Ladbrokes has been fiercely defending the proposal after shareholder Dermot Desmond described it as a “wrong deal”. Mr. Desmond owns about 3% of the business’ shares and recently became a commercial partner. He voiced his beliefs that the other shareholders should also pursue the group to set up an independent board, which would decide the future of the company. He also pointed to the fall in share prices, to which officials responded that this is more likely due to concerns on the side of investors regarding the mentioned above CMA ruling. The company insists the deal will benefit both – shareholders and customers by accommodating faster online growth, save on cost and reinvest in technology and improvements. Presently the two giants are respectively the second and third largest operators in the bookmaking business in the UK. Officials from both companies announced they will be using the merger to focus, improve and expand on their online platforms – great news for web players.
“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”
Jim Mullen, Ladbrokes
Mr. Mullen recently cut the full-year dividend from 8.9p a share to 3p. He shared the company „does not have the luxury of time“ and needs to rapidly expand its digital operations as they are lagging behind one of their main competitors – William Hill, especially in sports betting. Meanwhile, last year if you remember, Gala Coral hired bankers at Lazard to find a buyer for its 135 bingo clubs in an attempt to dispose of its retail business altogether. Seems like more and more the gaming industry is switching over to the web which, if we silence that tiny nostalgic notion attached to good old bingo halls, is not at all a bad thing. More efforts put in online gaming? Yes, please!