Green Light for GVC Ladbrokes Takeover

The Competition and Markets Authority (CMA) has approved online betting firm GVC Holdings’ acquisition of Ladbrokes Coral.  

The CMA has announced an end to its investigation into GVC’s proposed takeover of Ladbrokes Coral. Following news of the merger in December, the CMA launched a lengthy investigation, but on Wednesday, March 19, they declared there was no need for further scrutiny, concluding: “The merger does not give rise to competition concerns.”

Small UK presence

Previous arguments around the merger were that it could lead to “a substantial lessening of competition”. But the body found that “GVC has a small presence in the UK and only offers services online. The CMA has found that GVC and Ladbrokes are not close rivals and there are many other providers of betting and gaming services online”.

GVC Holdings plc is a leading e-gaming operator in both B2C and B2B markets. The company has four business segments each comprising several brands including sports brands (bwin, Sportingbet, Gamebookers), games brands (PartyPoker, PartyCasino, Foxy Bingo, Gioco Digitale, CasinoClub), along with B2B and non-core assets. GVC only acquired Bwin.Party Digital Entertainment plc February 1, 2016.

The current bid follows two previous attempts – the most recent discussions broke down last summer over price amid uncertainty ahead of the government’s gambling review.

After failing with an initial £2.7bn bid, an agreement was reached between the two firms shortly before Christmas last year, with the deal finally brokered at up to £4bn, but including a contingency entitlement. This was based on the results of the government’s recent review into the maximum stakes of Fixed Odds Betting Terminals (FOBTs).

Creation of a gambling giant

The deal could see the creation of an online-led global gambling giant, combining Ladbrokes’ high street and online operations with GVC’s stable of brands, including Sportingbet and PartyCasino.

At the shareholders meeting to approve the merger in February, GVC CEO Kenneth Alexander called it “an exciting opportunity, bringing together industry-leading online and retail brands.” However, final approval rested with the CMA.

But it seems as though there are no real competition concerns, with the CMA releasing this statement: “The CMA looked closely at betting services for individual sports and individual games but found that, in all cases, there will be enough rivals to the merged entity to prevent price increases or a reduced quality of service as a result of the merger.”

Full figure based on FOBTs

The Gambling Commission recently released the results of its twelve-week consultation, calling for a cut in the maximum stake to £2 on slots style fixed-odds betting terminals (FOBTs), but more surprisingly asked for the maximum stake in non-slots (FOBTs) to be cut to £30 – much higher than the £2 that campaigners were calling for.

As of yet, the government is still to reply to the recommendations and rule on its final decision. But a limit of £50 or lower will be implemented once the decision is made, as the gambling industry seeks to address these controversial terminals.

Provisional estimates state that Ladbrokes Coral could lose over 3,000 shops in the UK at the cost of 1,500 jobs if the government pushes forward with dramatic cuts. However, these figures were factored into the agreement with GVC, and therefore final purchase price is expected to fluctuate.

The facts

Under the terms of the Ladbrokes takeover, GVC will own around 53.5% of the enlarged group and its chief executive, Kenneth Alexander, will take the reins.

Ladbrokes has nearly 3,700 bookies on the high street and more than 25,000 staff, whereas GVC employs 2,800 staff and contractors throughout 15 offices globally. The Group is headquartered in the Isle of Man, is a constituent of the FTSE 250 index, and has licenses in more than 18 countries.

GVC Holdings stock is currently up 3 points following the CMA ruling.