GVC in Talks to Buy Ladbrokes Coral for Up to $5.2 Billion

(Bloomberg) -- GVC Holdings Plc is in advanced talks to acquire U.K. bookmaker Ladbrokes Coral Group Plc for as much as 3.9 billion pounds ($5.2 billion), as gambling companies seek greater scale in a business that's shifting online.

GVC is offering 160.90 pence a share in cash and stock, plus a contingent value right worth as much as 42.80 pence a share, the companies said in a statement Thursday. That would represent a premium of 50 percent to Wednesday's closing price for Ladbrokes.

“We think the combination makes sound strategic sense given the significant synergies” of 70 million to 100 million pounds, amounting to 15 percent to 20 percent of pro forma pretax profit, Morgan Stanley analyst Ed Young wrote in a note.

Ladbrokes Coral shares jumped as much as 29 percent, with GVC up as much as 8.3 percent, early Thursday in London.

A combination of GVC, which owns online gambling platforms including Partypoker and Sportingbet, and betting-shop operator Ladbrokes Coral could spark even more consolidation in the sector. Ladbrokes Coral, whose traditional betting shops in the U.K.'s town centers are fading, would get more exposure to the expanding digital gaming business, while GVC could reach more potential customers for its online platforms.

The merger would follow previous combinations like that of Paddy Power and Betfair as well as Ladbrokes with Coral. In another possible deal, William Hill Plc said last month that it was in initial negotiations to combine its Australian subsidiary with the CrownBet subsidiary of Crown Resorts Ltd. Young said the scale of a unified GVC and Ladbrokes would give the new company potential for further acquisitions.

The value of the contingent right would be determined by the outcome of a U.K. regulatory review of electronic betting terminals, according to the statement. That could result in sharply reduced wagers via the machines, cutting shop owners' revenue.

Speculation about a combination of GVC and Ladbrokes emerged last year. Under terms of the possible transaction disclosed Thursday, GVC shareholders would hold 53.5 percent of the merged entity. GVC Chief Executive Officer Kenny Alexander would serve as CEO.

The companies said they would combine via a scheme of arrangement, a U.K. merger process under which 75 percent of voting shareholders of the target company must approve a deal.

--With assistance from Sam Chambers and Paul Jarvis

To contact the reporter on this story: Eric Pfanner in London at epfanner1@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net, Phil Serafino, John J. Edwards III

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