(An item published at 0640 BST incorrectly identified Gala Coral's owners. The correct version follows.)
LONDON (Alliance News) - Ladbrokes PLC late on Monday confirmed that it is holding talks with unlisted rival Gala Coral Group Ltd on a possible merger of Ladbrokes and Coral Retail, Eurobet Retail, and Gala Coral's Online businesses.
The talks are focusing on plans to create an enlarged business which would be traded on the main market of the London Stock Exchange, Ladbrokes said. The betting firm currently is traded on the London main market and is a member of the FTSE 250 index.
"Since becoming CEO, my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced, and I look forward to presenting them to shareholders," said Jim Mullen, Ladbrokes' chief executive.
"A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies? shareholders. The board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms," Mullen added.
Ladbrokes said there is no certainty a deal will be done between the two or on the timing of any agreement. Ladbrokes also said that, should the deal proceed, it may undertake an equity placing in order to strengthen the balance sheet of the combined business. It also said that the results of its Business Review, due to be published on June 30, may be rescheduled dependent on how talks with Gala Coral progress.
Mullen is leading a review of Ladbrokes following the hefty drop in pretax profit the company suffered in 2014, hit by shop closures and impairment charges, which more than offset revenue growth over the year. The company said at the time, still under the leadership of former CEO Richard Glynn, that it intended to expand its international operations, close more betting shops, improve its online proposition, and bolster its competitive position in 2015.
But in April, reporting first-quarter results, Ladbrokes said profit in the first three months dropped heavily on the back of punter-friendly sporting results and the implementation of tax hikes in the UK.
Gala Coral is currently owned by private equity companies including Apollo Global Management, Cerberus Capital Management, Anchorage Capital Partners and Park Square Capital, who acquired the business after it collapsed under its debt pile in 2010. It is primarily focused on the UK and Italian markets and operates more than 1,800 betting shops in the UK, plus 132 bingo clubs under the Gala Bingo brand, and has 870 Eurobet shops in Italy.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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