Bookies Ladbrokes and Coral agree £2.3bn merger
Betting firms Ladbrokes and Gala Coral have agreed a merger to create a £2.3 billion gambling giant.
It is expected to overtake William Hill as the biggest bookmaker in the UK, although it is expected to have to dispose of some stores to satisfy any concerns about the deal from competition regulators.
The move brings together 2,100 shops from Ladbrokes and 1,845 from Coral. Talks about the merger were first made public last month.
Ladbrokes Coral will have net revenue of £2.1 billion and underlying earnings of £392 million, while the deal is expected to bring savings of £65 million a year.
The firms said it would be the largest licensed betting office in the UK, which would be "more efficient and sustainable in the long term".
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.
Jim Mullen, chief executive of Ladbrokes, will retain the position at the new business while Gala Coral boss Carl Leaver will be executive deputy chairman for 12 months after completion of the deal.
The announcement came as Mr Mullen said Ladbrokes was embarking on an "urgent, overdue and essential" three-year investment programme to boost revenues in its shops and grow its online business.
He warned that it would mean operating profits for the current year £20 million lower than expected and slashed the full-year dividend to 3p, down from 8.9p the year before. Shares fell 1%.
Ladbrokes released a half-year trading update showing operating profits down 38.2% to £41.7 million as Mr Mullen said "results have continued to favour our customers".
Meanwhile it is placing 92 million new shares representing up to around 10% of the company with new and existing investors to boost the balance sheet of the enlarged group.
Under the merger, both brands will continue to operate separately, "enabling us to give our existing loyal customers a consistent experience with the brands they favour, whilst providing additional products and best operating practices to both brands".
Mr Leaver said: "We'll both continue to deliver as standalone businesses, separately, but will be stronger together. We'll close the gap with competitors much more quickly."
The companies said further efficiency in shops will cut overheads and "make the UK retail estate more resilient in the face of recent taxation increases".
Outside the UK, the new firm will also have operations in Italy, Belgium and Spain and a growing online business in Australia. International operations will represent 11% of revenues.
The announcement signalled the growing importance of online business for the bookmaking industry, saying digital sports betting and gaming "remain the key growth opportunities in our market".
Today's merger includes Coral Retail, the UK bookmaking business, Gala Coral's 870-strong Eurobet division in Italy and Coral's online arm, but not the 132-site Gala bingo business.
Existing Ladbrokes shareholders will own just over half of the new company with shares issued to Gala Coral investors representing the remaining stake.
Completion is conditional on approval by the Competition and Markets Authority (CMA) but the firms said they were "confident that the merger is deliverable" and "committed to working closely with the CMA in its review".
Ladbrokes previously tried to buy its smaller rival in 1998, but was forced to give up after then British trade and industry minister Peter Mandelson said the deal had to be unwound on competition grounds and fears it would disadvantage punters.
One analyst has said the firms may have to sell as many as 15% of the shops to appease the CMA, but Mr Leaver said reports of the numbers of sites involved had been overstated.
He added those that are sold will be disposed of as going concerns, not closed.
The firms said they "attach great importance to retaining the skills of both management and employees".
They said that although there will be "operational restructuring", the "increased size and strength of the combined entity will offer attractive career prospects for its employees".
Ladbrokes announced plans alongside annual results in February to axe 60 betting shops as it continued to shake up its estate in readiness for a hike in taxation on gaming machines.
Gala Coral is currently owned by private equity companies Cinven, Permira and UK-listed Candover Investments.