LONDON (Alliance News) - Ladbrokes PLC on Thursday reiterated its recommendation that shareholders vote in favour of its proposed merger with rival Gala Coral Group Ltd, following the publication of a letter sent to shareholders earlier this week by Irish financier Dermot Desmond which raised concerns about the deal.
On Tuesday, Desmond sent a letter to fellow Ladbrokes shareholders arguing that the proposed merger will lead to the "death" of Ladbrokes as an independent company, urging shareholders to vote against the deal. Desmond, who controls Celtic Football Club in Scotland, is thought to have a stake of between 1.0% and 2.0% in Ladbrokes.
Desmond acknowledged that Ladbrokes has, unlike Coral, "failed to migrate its customers online" and that it needs a new management team in order to achieve this. "However giving away half your company and taking on over GBP800.0 million of debt is a very expensive way to recruit a quality management team," he wrote.
Desmond blamed Chairman Peter Erskine and Chairman Designate John Kelly for leading Ladbrokes "down the disastrous path to a deal that is effectively the death of Ladbrokes as an independent company".
He noted that if the deal goes through, Coral shareholders will receive access to liquidity for their shares and "significant relief" from a GBP2.2 billion debt burden, while Ladbrokes shareholders have suffered a 66% reduction in their dividends and will be "saddled with gearing multiples 50% higher than the current level".
"In addition Coral shareholders will benefit from the transition of the Ladbrokes clients to the higher value online space whereas this has already been largely accomplished for the Coral
customer base," Desmond said.
On Thursday morning, The Daily Telegraph reported a top ten shareholder in the company said he would meet with Desmond to discuss his concerns. The Telegraph said the shareholder, whom it did not name, told the paper he shared some of the concerns Desmond had outlined and would meet with the billionaire to hear his grievances.
Ladbrokes, on Thursday, said in response that it remains in favour of the proposed merger with Gala Coral and reiterated its recommendation that shareholders vote in favour of the deal. The meeting to vote on the deal is due to take place on Tuesday next week.
Shares in Ladbrokes were up 0.4% to 109.90 pence on Thursday.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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