his week, the UK Competition and Markets Authority have concluded that because GVC’s business was entirely online, domestic competition would not be damaged with the merger with Ladbrokes. GVC now has to await the Gambling Commission's verdict. If positive, the merger giant would become a roughly USD 6.5bn company, second only among listed peers to Paddy Power Betfair.
The approach by GVC for Ladbrokes was hailed as “genius” by fund managers for its inclusion of a so-called contingent variable rate - effectively a sliding scale of how much the acquirer would pay for its target - based on the outcome of a Government review into fixed odds betting terminals (FOBTs).
Ministers are currently deciding whether to slash the stake limit on FOBTs from USD 123 now to USD 2.45, something gambling firms say would lead to thousands of shop closures.
GVC will now pay roughly USD 3.9bn for Ladbrokes Coral in cash and shares. It will pay nothing more if FOBT stakes are cut to USD 2.45 but the total deal value could rise to USD4.9bn if the Government only reduces stakes to USD61.4. The deal is expected to complete later this month.
The purchase by GVC secures its stratospheric rise in prominence from 2013 when the then Aim-listed company was valued at roughly USD123m.
The minnow bought larger rival Sportingbet and then in 2015 it secured a deal with Bwin after fighting off a bid from online gambling firm 888. The latter deal pushed it into the FTSE 250.
In spite of its large size once the deal completes, chief executive Kenny Alexander warned this month that the company would not be immune from having to shut bookmaking shops if ministers opted for a USD2.46 FOBT stake.
“Shops would close and it would mean people being made redundant,” he said.
The industry has predicted roughly 3,000 betting shops out of about 8,500 would close under a USD2.46 stake scenario. Ladbrokes would potentially account for between 800 and 1,000 of those closures, GVC said.
Ladbrokes Coral itself was only formed in a merger in 2015, with bookmakers seeking to team up to defend against rising regulation.