Third time lucky for GVC?
Kenny Alexander is hoping it will be as he aims to complete one of the biggest deals in the gambling industry. The chief executive of GVC, the online betting company, has led two previous approaches for Ladbrokes Coral, the UK bookmaker, over the past year.
According to people close to the talks, those past negotiations broke down as board members, shareholders and industry analysts asked: “What’s the rush?”.
On Thursday, GVC said it was once again in “detailed discussions” over a takeover of Ladbrokes Coral, worth up to £3.9bn. Both sides are confident negotiations will be more fruitful this time.
The previous attempts to bring together GVC and Ladbrokes stumbled because of uncertainty around the government’s review on fixed-odds betting terminals (FOBTs) — in-store machines that have been dubbed by critics as the “crack cocaine” of gambling but are the largest source of revenues for some bookmakers, including Ladbrokes Coral.
While ministers announced in October that there would be a crackdown on the maximum stake for these machines, the final decision on where that limit will be fixed is not due until next month, making it difficult to assess the value of each company. But Mr Alexander insisted they must act now.
“You could wait forever,” he said. “People in this industry have been talking for years about consolidation, consolidation, consolidation. We are very ambitious, and very aggressive.
They have been sitting on their hands. I don’t know what they’re waiting for.” To deal with the uncertainty, GVC has proposed what Mr Alexander describes as a “clever” solution — a sliding scale that will change the final acquisition price according to how hard Ladbrokes Coral is hit by the FOBT curbs.
These will reduce the maximum stake on the machines from £100 to between £50 and £2. GVC has valued Ladbrokes Coral at £3.1bn at a minimum, but the final price could move up to £3.9bn. The deal structure is intended to reassure Ladbrokes Coral shareholders that they are getting a good price regardless of the impact of the new regulations. Other hurdles to a deal have also been removed.
Last month, GVC sold its Turkish business for about €150m, marking a shift away from its successful strategy of targeting “grey markets” — untaxed or unregulated areas. In past discussions, the Ladbrokes Coral board had expressed strong reservations about GVC’s Turkish business owing to concerns about the country’s regulatory position. People close to the high street bookmaker said it was continuing due diligence on GVC to be certain there were no Turkish revenues remaining in the business. GVC also waited to reignite takeover talks until after the government revealed its budget last month.
There was relief when Philip Hammond, the chancellor, did not reveal any surprise tax rises for the gambling sector. People close to the parties said Mr Alexander had been motivated to act fast in order to take advantage of GVC’s high share price, which has risen by a third over the past 12 months, helping to position the company as the acquirer of its longer-established competitor.
The companies said a combination would help GVC expand in the UK and Australia, two of the world’s largest regulated gambling markets, while Ladbrokes Coral would gain greater expertise in internet gambling.