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Ladbrokes Coral shares soar on GVC takeover approach
07 December 2017, 03:36 | Kelvin Horton
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A potential deal would give Ladbrokes Coral shareholders around 46.5 per cent of the combined group.
According to today's press release, Ladbrokes stockholders are likely to be offered cash and shares equal to 160.9p a share, plus an uplift worth up to 42.8p a share depending on the outcome of the United Kingdom government's ongoing regulatory review.
GVC, which is listed on the FTSE 250 with a market cap of under £3bn, said the possible offer would see it offer a mix of cash and shares, plus a further value of up to 42.8p structured as a "contingent value right" determined by the outcome of the government's triennial review into gaming machines in the bookmaking industry.
GVC chief executive Kenneth Alexander is expected to lead the combined group, although the firms said plans for the final management line-up would be worked out over the coming weeks.
Ladbrokes Coral shares jumped as much as 29 percent, with GVC up as much as 8.3 percent, early Thursday in London.
The final price that GVC is prepared to pay for Ladbrokes depends on the outcome of the review of fixed-odds betting terminals (FOTBs), which could see the maximum stake slashed to as little as £2 from £100 (€114). Discussions in the summer disintegrated following a price dispute prior to a government-led gambling review.
"Against this it does bring in some geographic risk in GVC notably around Germany following the exit from Turkey, whilst the cash elements, we estimate worth £600m and £800m (max for the triennial review element), are more the comfortable from the existing balance sheet and future cash generation".
On Nov. 2, GVC struck a deal to offload its Turkish business, which had been an obstacle in talks with Ladbrokes Coral because of the risks associated with operating in a country where many forms of gambling are banned.
"This triennial review has run and run and run and with the political climate in the United Kingdom who knows how much longer it may well run for?" he said.
Following a £2.3 billion merger previous year between Ladbrokes and Coral, the firm became the UK's biggest High Street bookmaker. Ladbrokes plc is a British-based betting and gambling company. Based on results from the first half of 2017, he said that 56 percent of the enlarged company's earnings would come from digital and 38 percent from United Kingdom retail.
"The boards believe that a transaction has the potential to create material shareholder value and that there is a compelling strategic rationale for the possible offer", the statement said.
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