Competition Authority Greenlights Ladbrokes Coral and GVC MergerMarch 22, 2018 1:03 pm
After looking into the proposed merger between gambling firms Ladbrokes Coral and GVC, the UK’s Competition and Markets Authority (CMA) has now given the green light for the transaction to take place.
£4 Billion Merger
In 2016, Ladbrokes completed a merger with Gala Coral for £2.3 billion, but the following year two further merger attempts with other companies subsequently failed. In late 2017, GVC then announced its intention to acquire a 53.5 percent share in Ladbrokes Coral for £4 billion, with the CMA having now given the go-ahead for the move.
Following completion, GVC Chief Executive Kenneth Alexander will head the merged firm, with Ladbrokes’s Paul Bowtell becoming its Chief Financial Officer. The new business will subsequently encompass Ladbrokes’s high street bookmakers and internet operations, and GVC’s highly popular brands, which includes PartyCasino, Foxy Bingo, and Sportingbet.
Creating a Giant
The Ladbrokes Coral and GVC merger is expected to result in up to 1,600 members of staff at Ladbrokes Coral losing their jobs, with overall savings to the new company estimated to be around £100 million per annum. The merger will also result in the creation of a worldwide online gambling giant initially worth around £5.3 billion, which necessitated the involvement of the UK competition watchdog. Amongst its chief concerns was determining whether the merger would cause a “substantial lessening of competition” in the country’s gambling market, thus leading to overall price increases.
While the CMA has now given its approval to the deal, not all outcomes are successful and this year the watchdog blocked a proposed acquisition by Rupert Murdoch, the owner of telecommunications and media firm Sky, stating that the merger was “not in the public interest.” Australian media mogul Murdoch already owns UK newspapers The Sunday Times, The Sun, and The Times, and the CMA determined that his acquiring Sky would have given him too much access and control over TV, internet, and phone businesses in Britain.
CMA Green Light
According to CMA, Ladbrokes Coral and GVC are not close competitors, and furthermore there are numerous other rivals firms providing similar products and services in the market. As a CMA statement explained:
“The probe 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.”
Likewise, both GVC and Ladbrokes shareholders voted overwhelmingly in favor of the merger. The deal now just awaits final approval by the United Kingdom’s High Court on March 26th, and providing its judgement is positive the deal will be completed by March 28, with joint shares ready to be traded as soon as the next day.
Ladbrokes Coral owns around 3,700 betting shops situated on high street across the UK, and last year the company generated a significant amount of its revenues through Fixed Odds Betting Terminals (FOBTs) located at these venues. FOBTs, however, have come under severe criticism for being too addictive, and capable of ruining a gamblers life with their upper stake limit set incredibly high at £100 per spin.
This week, the UK Gambling Commission subsequently gave its recommendation that the stake limit should be lowered to £30 per spin, although the Government has still to decide on whether to accept the UKGC’s suggestion. In the meantime, GVC has said that it will pay £3.2 billion for Ladbrokes Coral, but would pay more if FOBT stakes are set above £50. If a lower level of lower level of £2 is set, though, analyst have warned that this could result in the closure of some 3,000 of the country’s 8,500 betting shops, with Ladbrokes predicted to lose up to 1,000, or nearly a quarter of their bookies.