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Ladbrokes and Gala Coral agree £2.3bn merger

Fri, 24th Jul 2015 08:49

(ShareCast News) - Ladbrokes announced on Friday that it has agreed a £2.3bn merger with Gala Coral, as it outlined a new three-year plan which will dent its 2015 operating profit.It said that on an illustrative aggregated basis, Ladbrokes Coral will have net revenue of £2.1bn and £392m in core earnings.Ladbrokes is placing 93m shares, or around 10% of the company, to help fund the deal.It said the strategic rationale behind the deal included the potential for faster online growth through leading multi-channel technology, a dual-brand strategy enabling effective and efficient cross-brand marketing across a larger customer and revenue base.It said the group will have the largest UK Licensed Betting Office estate, which will be strongly cash generative, more efficient and sustainable in the long term.The deal will also create an extensive international portfolio of regulated business providing a platform for further growth with strong retail and online operations in Italy, Belgium and Spain and a rapidly growing online operation in Australia.Finally, Ladbrokes pointed to significant cost synergies of at least £65m per year, most of which will be delivered in the second year post merger, underpinning shareholder returns.Ladbrokes chairman Peter Erskine said: "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. The transaction will provide an attractive opportunity to generate considerable value for both sets of shareholders, through significant operating synergies and a strong cash flow profile."Ladbrokes will issue new ordinary shares to the existing shareholders of Gala Coral representing 48.25% of the enlarged issued share capital of the combined entity, while existing Ladbrokes shareholders will own 51.75% on the same basis.Upon completion of the merger, Ladbrokes chief executive Jim Mullen will be CEO, while Carl Leaver, CEO of Gala Coral, will be executive deputy chairman for a term of 12 months and lead delivery of the synergies.John Kelly OBE, senior independent non-executive director of Ladbrokes will be non-executive chairman and Paul Bowtell, chief financial officer of Gal will be CFO.In a separate statement, Ladbrokes revealed the outcome of its strategy review, which was delayed after the company entered talks with Coral.Ladbrokes announced a three-year, marketing-led plan to aggressively grow its UK Digital recreational sportsbetting customer base through and increase its UK Retail footfall. The company will also look to deliver multi-channel revenue growth from its UK Retail and Digital customer base and accelerate Ladbrokes Australia's revenue growth further.As a result of the plans announced, the company said its 2015 operating profit will be around £20m lower than it previously expected.Ladbrokes said it is aiming for its net revenue per shop and earnings before interest and tax to be higher than in 2014 by 2017.Chief executive Jim Mullen said: "In the UK our focus will be on offering market-leading product in Digital, whilst on the high street, a focused reinvigoration of our shops and our people will re-establish Ladbrokes as the go-to sportsbetting experts."We see significant untapped opportunity for Ladbrokes to become a truly multichannel sportsbetting business where only 11% of retail customers currently also bet with us online. Our Australian business is a jewel - growing rapidly in an enthusiastic sportsbetting market and we intend to continue to support, and learn from, their innovation and growth." At 14:15, Ladbrokes shares were down 2.6% at 125p.

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Gala Coral revenue up but losses widen

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Ladbrokes given a boost by Berenberg upgrade

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