GVC’s Failed Courtship with Ladbrokes Coral Signals for New Wave of Gambling Merger and Acquisition Activity

This morning, the global gambling community woke up to the news that GVC Holdings has renewed its appetite to consolidate its business with that of Ladbrokes Coral. The Isle of Man-based online gambling operator has reportedly approached its counterpart with an initial £2.2-billion offer that could have swelled up to £3.6 billion.

It could have, but it did not as Ladbrokes Coral has quickly walked out of takeover talks. The gambling operator itself is a product of a merger between major UK companies Ladbrokes and Gala Coral. Their consolidation was completed last fall to form UK’s largest operator of betting shops.

At present, Ladbrokes Coral’s market cap stands at £2.45 billion, which means that GVC’s original bid undervalued the company. It is believed that this was, in fact, was one of the main reasons why its proposal was rejected.

Neither Ladbrokes Coral representatives, nor ones from GVC have commented on the reports that emerged late last night. However, it is important to note the fact that merger and acquisition reports have eventually emerged within the gambling space. Ever-growing competition in the field and looming regulatory changes have been expected to unlock a new wave of merger and acquisition deals.

An Overview of GVC’s Courtship of Ladbrokes Coral

If GVC’s takeover bid had succeeded, this would have resulted in the creation of one of the world’s biggest gambling companies with large retail presence across the UK and even larger online presence across a number of regulated jurisdictions.

Ladbrokes Coral is a company with significant experience in the land-based gambling industry of the United Kingdom. It is one of the best-recognized brands and the largest operator of a chain of betting shops across the nation. After the completed merger of Ladbrokes and Coral, the combined entity now runs more than 3,500 such facilities in different parts of the UK.

It can also be said that Ladbrokes Coral has a relatively well-performing online gambling business. It operates in some of the major regulated iGaming jurisdictions, which adds up to its brand recognition among gambling customers. Yet, the company still has to catch up with operators that are only engaged in the online gambling space, with GVC being one of these.

As for GVC itself, it has strong roots in the online gambling industry, but it has apparently been looking to establish itself on the retail market, as well.

According to gambling analysts, one of the reasons why Ladbrokes Coral may have rejected GVC’s offer could have been the fact that the latter has strong presence in Turkey. However, the country’s government has recently made it known that it would launch a crackdown on the provision of gambling services to residents and that online gambling would be one of the main targets of said crackdown. Regulatory complications are the last thing Ladbrokes Coral needs right now with a pending clampdown on gambling in its homeland.

This has not been the first time when GVC has courted Ladbrokes Coral with a takeover proposal. Last fall, before the Ladbrokes/Coral merger was completed, GVC approached Ladbrokes with a similar offer. As it could be assumed, discussions did not go very far.

What Could Restart Merger and Acquisition Activity in the Gambling Field?

The UK government is set to present its review of the state of the nation’s gambling industry sometime in September. Said review is likely to result in a much-dreaded crackdown on fixed-odds betting terminals and other curbs on the way gambling products and services are provided and advertised in the country.

FOBTs or B2 gaming machines constitute a great portion of the retail business of a number of UK gambling operators, Ladbrokes Coral included. Influential MPs have long been calling for a reduction of the maximum stakes the controversial gaming devices accept from £100 to just £2.

If such a massive reduction is implemented following the review’s publication this fall, operators’ retail businesses will suffer a blow of unprecedented force. According to gambling analysts, Ladbrokes Coral alone could lose up to £450 million in gross gambling yield from FOBTs in 2018.

In a strictly regulated environment with ever-growing competition, scale may be of the utmost importance. This is why operators will probably look for scale should a gambling crackdown of any kind is launched. What is more, combination of companies with strong retail presence and weaker online presence with companies that deal in the iGaming space exclusively will be the most likely scenario, in case a new wave of merger and acquisition deals is unleashed.

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