It has been interesting to read the latest news on the Ladbroke/Coral merger ... as Dominic Walsh reports today in The Times ...
After the stock market equivalent of a stewards' inquiry, the Competition and Markets' Authority (CMA) is set to deliver a ruling that will determine the shape of Britain's high street betting industry.
Ladbrokes and Coral will learn in the next few days whether their proposed merger is to be waved through by the competition regulator and, if so, what proportion of the combined estate of about 4,000 betting shops they will be forced to sell.
Until now, the proposed 2.3 billion pound merger, first mooted almost a year ago, had been widely tipped to be given the green light, provided that the would-be partners address local competition issues by agreeing to sell off or close perhaps 300 to 400 betting shops.
Indeed Ladbrokes and Coral, the second and third biggest betting shop operators after William Hill, are confident that the CMA will conclude that retail betting comprising almost 9,000 shops, should be considered in the context of the wider market, including online.
However industry experts suggested yesterday that such an agreement could be undermined by data showing that about three quarters of retail punters place bets only in shops.
One said: "they have also argued that retail is in decline yet that isn't borne out in Ladbroke's and Coral's own trading statements".
Analysts cited the blocking this week of the proposed merger between O2 and Three as a possible indication of what could happen. Europe's competition commission prohibited the deal to create Britain's largest standalone mobile phone group on the ground that it would have cut the number of big players from four to three, an argument supported by the CMA.
In its submission to the CMA inquiry, William Hill claimed that competitive pressures in the retail market were 'more local than national' and were based on location and quality of service. It said that digital betting had not had a significant impact on retail.
This week's decision comes 18 years after Ladbroke's bought Coral from Bass (the brewer) for 375.5 million pounds - only for Peter Mandelson, the business secretary at that time, to force the deal to be unwound on the advice of the old Monolpolies' and Mergers' Commission. Coral ended up as part of a wider empire that became Gala Coral Group but debt woes sparked a painful debt re-structuring and break-up.
Now controlled by a consortium which includes Goldman Sachs, it has sold its bingo halls and casinos, leaving it with betting businesses in Britain and Italy and an online business.
If the mergr is blocked, Gala Coral has said it would dust off plans for a stock market flotation. Analysts believe that it probably would have to undergo a fresh re-financing.
The Telegraph reports:
The fate of the £2.3bn merger of Ladbrokes and Coral will be decided this week, with the competition regulator expected to rule that the bookmakers must sell a swathe of shops for the deal to go through.
Industry sources expect the Competition and Markets Authority (CMA) to publish its long-awaited provisional report into the deal by Friday.
They believe the CMA, which has been undertaking an in-depth investigation of the merger, will say the bookies should offload between 400 and 500 locations to satisfy concerns about competition. The tie-up would create the country's biggest bookie, with Ladbrokes Coral, having about 4,000 sites before any disposals.
It is understood that initial estimates by the CMA encompassed a broad range either side of the 500-shop mark. However, those forecasts were drawn up some weeks ago and will have been narrowed. The CMA was initially set to release its provisional findings last month. It could say the merger should be blocked altogether, but that is thought to be unlikely. The merger of Ladbrokes and Coral, which was agreed last July, is one of a host of tie-ups that have swept Britain's gambling industry as betting companies seek greater scale to help to absorb rising taxation and stricter regulation.
Paddy Power, the Irish bookie, recently merged with betting exchange Betfair to create an online gambling giant worth £7.5bn. Meanwhile, Bwin.Party sold itself to GVC last autumn in a £1bn deal.
Ladbrokes, which is in the midst of a turnaround led by boss Jim Mullen, earlier this month became the latest company to be caught up in the Shareholder Spring. The bookie, which in 2015 suffered its first annual loss for a decade, was humiliated after 42.1pc of investors voted against remuneration at the business last year.
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