Ladbrokes merger "exciting", says Gala Coral chief

Gala Coral chief executive Carl Leaver has told staff a merger with rival Ladbrokes could be an “exciting development” although stressed it was “business as usual”, with any deal likely to take up to 12 months to complete.

Employees at the operator’s Stratford and Gibraltar offices were this morning called into meetings to be briefed on the ongoing merger discussions and informed of what a potential deal would mean for the future of the business.

And in an additional email circulated this morning, and seen by eGR, Leaver told staff it was important they remained focused on the day-to-day running of the business, with any potential deal likely to face lengthy government scrutiny.

“I know this will feel like big news, and it certainly has the potential to be an exciting development for us, but it is by no means certain,” Leaver said.

“Even if we reach an agreement with Ladbrokes, it would take a long time before the merger would complete as it would require the approval of the competition authorities, which could take as long as 12 months.

“I will aim to keep you updated as much as I can, but in the meantime, it is importnat for everyone to remain focused on business as usual,” he added.

Gala Coral also released an official statement earlier today to confirm the talks, with its release coming soon after Ladbrokes CEO Jim Mullen had informed the market of the potential reverse takeover.

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

But the potential merger, which would on paper create an online business with annual revenues of some £400m, has been met with a mixed response by City analysts.

Advising a ‘sell’ of Ladbrokes shares, Simon French of Cenkos Securities said the deal has “far too many obstacles in the way of a successful merger”, particularly due to the likely involvement of UK authorities over the enlarged group’s combined retail market share.

“We see such a merger to be fraught with difficulty not least given the circa 45% combined market share the group would have of UK retail,” French said.

“This market share would likely to leave the group mired in a phase two Competition and Markets Authority enquiry which would last months and leave the two groups incapacitated at a time of rapid industry change,” he added.

However Peel Hunt’s Nick Batram took an opposing view and advised a ‘buy’ of Ladbrokes, highlighting “obvious opportunities” such as benefits related to costs savings and a potentially smooth merger with both firms operating on the Playtech platform.

In 1998, Ladbrokes failed in an attempt to acquire Coral for £368m after the then trade and industry secretary Peter Mandelson deemed the purchase would “damage competition and disadvantage punters”.