The boards of London-listed betting and gaming operators GVC Holdings and Ladbrokes Coral Group have reached agreement on the proposed acquisition of Ladbrokes Coral by GVC.
The recommended offer will see Ladbrokes Coral shareholders receive £0.327 in cash, 0.141 ordinary GVC shares and a contingent entitlement of up to a further £0.428 plus a contingent value right, for each Ladbrokes Coral share.
The contingent value right (CVR) takes into account the UK’s Triennial Review and its potential impact on machine stake levels, and could see the contingent entitlement value drop to zero.
As a result, the transaction value will be in the region of £3.2bn and £4.0bn, with Ladbrokes Coral shareholders holding approximately 46.5 per cent of the enlarged group.
Commenting on the agreement, GVC chief executive Kenneth Alexander said: “The creation of one of the world's largest listed sportsbetting companies, combining a portfolio of established brands, proven technology and leading market positions in multiple geographies, is a truly exciting prospect.
“In a dynamically evolving industry, the transaction creates an enlarged group with the scale, diversity, proprietary technology and management expertise to pursue many opportunities globally.”
Ladbrokes Coral chairman John Kelly added: “In its relatively short time as a merged entity, Ladbrokes Coral has demonstrated why scale can be so effective in this market. The management team have delivered a very successful merger that has created a leading betting and gaming business built on strong brands well positioned in key markets. We have a leading multi-channel offer that utilises our retail and on-line businesses and offers us a promising future.
“Notwithstanding that, the Ladbrokes Coral board believes that the proposed combination with GVC accelerates our strategy to improve the customer experience, drive faster online growth and build a more diverse and extensive international portfolio of businesses.”
“The acquisition has compelling strategic rationale allied to an opportunity to use the best of both from proven management teams and will create material shareholder value,” Kelly added. “It secures earlier delivery of our long-term value potential, which is why the board of Ladbrokes Coral has unanimously recommended GVC's offer."
The companies estimate that the enlarged group will deliver recurring annual pre-tax cost synergies of not less than £100m by 2021, achieving savings of £7m in the first year following completion, £33m in year two and £56m in year three.
Technology and data-enabled efficiencies are expected to account for approximately 44 per cent of the identified cost synergies, as sports betting and gaming operations are consolidated onto common platforms, where possible.
The board of the enlarged group will be comprised of GVC’s Lee Feldman as chairman and Kenneth Alexander as chief executive, and Ladbrokes’ Paul Bowtell as chief financial officer, alongside other non-executive directors who are expected to be drawn from the current GVC Board.
The senior management team will include Andy Hornby and Shay Segev as joint chief operating officers, with Hornby assuming responsibility for all retail business in the UK and Europe and all digital marketing, while Segev assumes responsibility for technology, product, customer service, and leadership of operational and technology integration.
The acquisition, which is subject to customary closing conditions, is expected to complete in the first or second quarter of 2018.
Shares in Ladbrokes Coral Group plc. (LSE:LCL) were trading up 0.69 per cent at 175.20 pence per share on the news in London early Friday, while shares in GVC Holdings plc. (LSE:GVC) were trading down 1.02 per cent at 924.50 pence per share.