Major Merger on the Cards?

Racing Post has reported on some interesting discussions ...

Shares in Ladbrokes soared by almost 20 per cent on Tuesday morning after the firm confirmed they are in merger talks with the parent company of fellow high street bookmaking giant Coral.

At 1pm, Ladbrokes shares were valued at 146p each, an increase of 23.90p or 19.57 per cent. By close they had settled at 140p each.

Ladbrokes issued a statement in response to a Racing Post story on Monday night revealing the two firms were in discussions.

The news will rock the betting industry and bring back memories of Ladbrokes' attempt to take over Coral for £363 million in 1998, a move blocked by the then secretary of state for trade and industry Peter Mandelson, who said the purchase "would damage competition and disadvantage punters".

However, that was before the boom in online betting changed the market, and a deal between the two companies might not meet the same obstacles.

While Ladbrokes and Coral are the second and third biggest betting office operators behind William Hill with 2,194 and 1,845 offices respectively between them, their online presence is behind the likes of Hills, Paddy Power and bet365.

Ladbrokes confirmed they were in discussions with the board of Gala Coral regarding a possible merger of Ladbrokes and Coral retail, Eurobet retail and Gala Coral's online business to create an enlarged business which would be traded on the main market of the London Stock Exchange.

However they warned shareholders that there was no certainty that the discussions would lead to any agreement.

The firm's chief executive Jim Mullen is due to unveil his business review on June 30 but Ladbrokes said that may be re-scheduled depending on how discussions progressed.

Mullen said: "Since becoming CEO my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced and I look forward to presenting them to shareholders.

"A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies' shareholders.

"The board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms."