UK bookmaker Ladbrokes confirmed Tuesday that it is in talks with Gala Coral Group regarding a possible merger of the two businesses.

In response to recent press speculation, Ladbrokes said that it was in discussions with the board of Gala Coral over a possible merger of Ladbrokes and Coral Retail, Eurobet Retail and Gala Coral's online operations, to create an enlarged business.

The announcement comes ahead of a planned business review presentation by Ladbrokes CEO Jim Mullen on his plans for revitalising the business.

"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,” said Mullen. “My plans are well advanced and I look forward to presenting them to shareholders.

“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."

Ladbrokes added that there can be no certainty that the discussions between the company and Gala Coral will lead to any agreement concerning the possible merger, or as to the timing or terms of any such agreement.

Ladbrokes also noted that, in the event that such a transaction proceeds, it may undertake a non pre-emptive equity placing to strengthen the balance sheet of the combined entity.

Ladbrokes’ business review presentation, scheduled for June 30th, may now be re-scheduled depending on how these discussions progress.

In a statement, Gala Coral said that a merger with Ladbrokes has the potential to be “strongly value accretive” for both companies’ shareholders.

“Under the leadership of the current management team, Gala Coral Group has executed a successful turnaround which has delivered continuing strong growth,” the operator said. “The company and its shareholders are evaluating all strategic options, including a possible initial public offering.

“There can be no certainty that the discussions between Ladbrokes and Gala Coral Group will lead to any agreement and Gala Coral Group remains confident in its future as a standalone business with highly attractive future potential.”

Shares in Ladbrokes plc (Co. Data) (LSE:LAD) have soared by 9.91 per cent to 134.20 pence per share in London this morning following the news.