There has been an update on the long-awaited takeover of Ladbrokes Coral Plc by GVC Holdings.
The FTSE-listed online gambling group had launched a general syndication bid for the debt-financed initiative but was referred to the UK Competition and Markets Authority (CMA) in February. They are investigating whether the combo would incur a “substantial lessening of competition” for gambling in the UK.
On Monday 5th March, GVC Holdings issued a market update that announced it had secured a syndicated ‘Lien Term B’ debt-bond valued at £1.4bn (comprising £, €, and US$ tranches). It also announced access to a further £550m multi-currency revolving credit facility once it restructures its debt.
If accepted, the bid to buy Ladbrokes Coral will cost GVC around £4bn – equating to 207p per share. Although, these figures are dependent on how the UK government reviews its fixed-odd betting tariff regulations if favorable shareholders receive a premium of around 19%.
As part of this, Ladbrokes Coral shareholders would be awarded a 32.7p in cash per share, 0.141 ordinaries GVC shares and a further contingent entitlement of up to an additional 42.8p should Ladbrokes Coral, again depending on the FOBTs review.
GVC explained that it would further use refinanced proceeds to clear certain Ladbrokes Coral debt obligations, deal costs and expenses. The £550m will be used to fund certain general corporate initiatives/purposes should GVC and Ladbrokes Coral combine.
A second buy-out
As part of its shift in strategy towards regulated gambling markets, GVC also announced plans to buy out 51% of the shares of the company that owns Crystalbet, the leading gaming operator in the Republic of Georgia. With the initial stake costing €41m in cash, it has also agreed to buy the remaining 49% in 2021 for a maximum of €150m.
GVC’s management believes that Crystalbet operates the most extensive online sportsbook, and is the second largest online gaming brand overall, in the Republic of Georgia. Crystalbet had revenues of €34m in the year to December, and post-tax profits of €10m
Kenneth Alexander, the chief executive officer of GVC, said to the FT, “Through access to GVC’s content, technology, and digital marketing skills, we believe Crystalbet can become a clear leader in the regulated Georgian market. This acquisition is in line with our stated strategy of being a truly global player, with a focus on regulated/regulating markets.
“We are delighted to welcome Crystalbet to the GVC Group, having been impressed with what the management team has achieved thus far. Through access to GVC’s content, technology, and digital marketing skills, we believe Crystalbet can become a clear leader in the regulated Georgian market. This acquisition is in line with our stated strategy of being a truly global player, with a focus on regulated/regulating markets.”
In a statement, GVC said that the Georgian group had “achieved significant growth, driven by its entrepreneurial management team and a highly successful marketing strategy,” and that it believed Crystalbet was the largest online sportsbook and second-largest online gaming brand in the Republic. But shares in GVC were down 1.3% at 861.5p in a rising market in the first hour of trading.
Turnaround
This is a new turnaround for GVC, strategically moving away from ‘grey markets’ those that are untaxed or unregulated and seen as volatile. It copies the likes of Paddy Power Betfair which abandoned territories it saw as ‘too risky’ in 2012.
Last year, the Isle of Man-based group announced it would concentrate on regulated markets or those where it thought there was a “realistic path to regulation.”
For GVC Holdings the acquisition will go a long way to freshen up its reputation. Just last month they were fined £350,000 by the Gambling Commission for repeatedly misleading gamblers with adverts relating to free bonuses.
Hit by fines
The fine was imposed on GVC’s operating subsidiary ElectraWorks, the provider of online gambling website b-win, following breaches of the Gambling Commission’s codes relating to advertising practice and free bet and bonus offers.
The Advertising Standards Authority upheld a complaint against ElectraWorks in mid-August 2016 regarding a free bonus promotion on bwin’s website, with another breach of a similar nature discovered a week later.
Further breaches were made in April, June, and August last year on a variety of other casino and poker websites, all owned by GVC Holdings.
ElectraWorks has also received a formal warning from the Gambling Commission for failing to ensure that the person responsible for marketing at the business holds a personal management license.
