Shareholder Says Proposed Ladbrokes-Coral Merger a Bad Deal

Irish billionaire and Ladbrokes shareholder Dermot Desmond is accusing the Ladbrokes-Coral merger of being a bad deal.

In UK gambling news, Desmond is attacking the top management of Ladbrokes over the proposed Ladbrokes-Coral merger deal. Desmond—who sold his betting exchange Betdaq to Ladbrokes for £30 million in 2013 and who has been a company shareholder for nine years—said that Ladbrokes shareholders have passively accepted bad news and loss of value from the company for over a decade, and that the proposed deal with Coral was the last straw.

He is accusing chairman Peter Erskine and senior board member John Kelly of trying to make a disastrous deal that will be the end of Ladbrokes as an independent company, and that a potential enquiry by the “Competition and Mergers Authority will delay any completion of the proposed transaction until mid-2016,” would mean the disposal of 400 to 1,000 Ladbrokes betting shops to competitors. He also mentioned that a lack of “propriety technology has been a significant driver of Ladbrokes’ underperformance versus peers and the merger with Coral, which is largely reliant on third party technology, does nothing to address this weakness.”

Desmond noted the regulatory risk that Ladbrokes was exposed to regarding fixed odds betting terminals, and says that by merging with Coral they’d be doubling that risk. He also pointed out that he is not the only one to disapprove of the merger: Since the Ladbrokes-Coal merger’s announcement, Ladbrokes’ share price “has fallen 16% from 130p to 109p, wiping out a further c. £200 million in Ladbrokes shareholder value, indicating the market’s view on the proposed transaction.”

Ladbrokes-Coral merger would actually be a company takeover

Will Coral overtake Ladbrokes? (Photo: Telegraph)

If Desmond is to be believed, the main beneficiaries of the Ladbrokes-Coral merger would be “Coral shareholders, who receive access to liquidity for their shares and significant relief from a £2.2 billion debt burden. Make no mistake—this is a zero premium acquisition of Ladbrokes by Coral.” He said that Ladbrokes cut its dividend by 66% and are talking about a move to “a Debt/EBITDA ratio of 3.0x, solely to allow a refinancing of £865 million of GalaCoral debt. This allows Ladbrokes’ management to present the Coral merger as a Ladbrokes-led transaction rather than a takeover by Coral.”

In a concluding statement about the potential takeover of the online sportsbooks in UK and online casino, Desmond said that the Ladbrokes-Coral merger was “not a good deal for Ladbrokes shareholders and shareholders should vote against it and insist that an independent committee of the Board, with appropriate advice from an independent investment bank. Ladbrokes has the potential to be a great company once again and to become a major force globally in online gaming—a sector that is growing fast and where well managed companies are thriving.”