With the Government’s gambling industry and FOBTs review already underway, the upcoming months could bring some challenges to the UK gambling sector, and especially, to gambling operators.
Despite the fact that the results of the review have not been revealed yet, local regulatory authorities are expected to impose tighter legislative framework that could have a negative impact on the country’s industry.
A possible clampdown on the UK gambling sector would most likely result in more challenging environment for local companies that would be forced to continue operating in more unfavourable conditions.
Industry Clampdown Effects on Ladbrokes Coral
Such a step would probably bring serious consequences for large gambling companies such as Ladbrokes Coral, especially considering the fact that the latter is currently the oldest and largest bookmaker on the territory of the UK and on a global scale. Taking into account the fact that the operator currently has over 3,600 betting shops in the UK, a possible clampdown on the industry could have a devastating effect on the operator and its performance.
So, in case that the UK Government decides to finally introduce certain limits on fixed-odds betting terminals (FOBTs) maximum stakes, Ladbrokes Coral would be among the companies which would be most-affected by the crackdown.
As Casino Guardian has previously reported, the fixed-odds betting machines have been one of the most contradictory topics in the local gambling industry due to their high maximum stakes and addictiveness. A number of charity organisations and Members of Parliament have recommended the Government to reduce the FOBTs’ maximum stake of £100 to as much as £2 in order to protect local players from unwanted negative gambling-related harm and spreading problem gambling behaviour.
Unfortunately, such a reduction of the FOBTs maximum stake would seriously hit the profits of large gambling and betting operators in the UK, making them suffer massive losses. Fixed-odds betting machines have been some of the major money makers for many UK bookmakers, including Ladbrokes Coral, as customers are allowed to place a bet of up to £100 every twenty seconds. So, considering the fact that about 35% of the net machine revenue of Ladbrokes has been generated by FOBTs, some market analysts have calculated possible losses of the operator, saying that the company would be forced to deal with a revenue loss of approximately £450 million on an annual basis.
As mentioned above, such a step would definitely make the operating environment a challenging one for local operators, which is exactly why some of them, including Ladbrokes Coral, could consider other options to deal with difficulties, so we can see some large merger or acquisition deals over the upcoming months.
Possible Merger Options for Ladbrokes Coral
According to some media reports, the largest British bookmaker has already asked some analysts and advisors to consider possible merger options that would have a beneficial impact on the company’s performance in case of a Government’s crackdown.
Reportedly, Ladbrokes Coral has already asked Deutsche Bank, Greenhill sand UBS to review possible merger options, including assets sale to GVC Holdings, in case that the local authorities and regulators decide to cut maximum stakes of fixed-odds betting terminals after the Government announces its review’s results in October.
GVC Holdings Proposal
As Casino Guardian reported about a month ago, the gambling and iGaming group GVC Holdings and Ladbrokes have held talks about a possible takeover deal. At the time when the two parties discussed the takeover proposal, GVC Holdings made a takeover offer estimated to £3.6 billion, but Ladbrokes turned down the bid.
According to reports made at the time of the takeover proposal, GVC Holdings initially valued Ladbrokes Coral at approximately £2.7 billion. Still, considering the ongoing UK Government’s review of the local gambling industry, GVC Holdings decided to boost the takeover bid but it turned out to be not sufficient for Ladbrokes to agree to a deal.
In case that the deal had been successful, the two companies would have created a gambling behemoth that would have been one of the largest ones not only in the UK, but also across the world.
Despite that the GVC Holdings’ bid was not successful at the time, the tension around the Government’s gambling market could lead to a new wave of merger and acquisition deals across the industry. In this sense, GVC Holdings could make a new takeover offer to the bookmaker, which on the other hand, could reconsider its denial and this time agree on a new deal.
Such a bid would come as the third takeover offer for Ladbrokes since it finalised its merger with Coral last year. The merger between the two companies was completed in November 2016, in spite of the industry-wide scepticism for the deal. The deal also turned out to be very successful, especially considering the fact that in July 2017 the combined entity revealed trading that was ahead of full-year projections.
Previous Tabcorp Merger Speculations
Last year, right after the completion of the long-awaited Ladbrokes and Coral merger, some media speculations appeared that newly-formed betting giant was preparing a bid to acquire the Australia media and gambling operator Tabcorp Holdings. The rumours did not come as a surprise, especially considering that three years ago, in 2013, an acquisition bid was made to Tabcorp by Ladbrokes, but was not successful at the time.
On the other hand, the reported approach of Ladbrokes to Australia-based Tabcorp came at the time when the gambling giant came at a time when Tabcorp had already agreed on a merger with its rival company Tatts Group. Despite the fact that the takeover offer of Ladbrokes Coral was not successful at the time, rumours appeared that its approach could have a negative influence on the agreed deal between the two Australian gambling operators.
In case that a deal was agreed by Tabcorp and Ladbrokes, the regulatory authorities would probably class it as a reverse takeover, since Ladbrokes would have taken over a company that had a larger market value that its own. In any case, such a deal would come as part of the UK-based gambling operator’s strategy to expand its global presence and consolidate its positions in the international gambling market.
Ladbrokes and William Hill Bidding War for Tatts Group
Only a month after the long-awaited merger between Ladbrokes and Coral was finally completed, the combined entity was reported to be considering a potential takeover of the sports betting assets of the Australia-based Tatts Group. Ladbrokes Coral’s rival William Hill was also reported to be eyeing such a deal at the time.
A year ago, both Ladbrokes Coral and William Hill have emphasized on the importance to strategically expand their businesses on a global scale, especially in the Australian betting market, so the increased interest of the two companies in a possible acquisition of Tatts Group could be easily explained. In addition, a takeover deal with Tatts would help both Ladbrokes Coral and William Hill to boost their sports betting assets.
At the time when rumours of a possible bidding war between Ladbrokes Coral and William Hill starting roaming around, Tatts Group saw another takeover offer, too. Apart from Tabcorp, which the Group had already been negotiating, the Pacific Consortium – an investors group led by London-based Macquarie and New York-based KKR – also approached the company, making a formal £4.4-billion takeover offer.
Conclusion
Considering the tighter regulatory conditions that have been lately imposed across the UK gambling industry, the increased pressure on local gambling operators has not come as a surprise. The fact that the country’s Government and regulatory authorities have been looking forward to imposing stricter rules on the gambling industry players has raised the pressure on gambling companies, making them look for more appropriate market strategies in order to deal with challenging market conditions.
This is exactly why an upcoming wave of merger and acquisition deals is expected to be seen soon in the UK gambling sector. As one of the major players there, Ladbrokes Coral could also be on the way to further consolidation, so a merger or a takeover deal may not be that far ahead for the bookmaker.
- Author
Olivia Cole
