Ladbrokes began negotiations for a merger with rival Gala Coral in June 2015. Those negotiations are now in their final stages and are being led by Jim Mullen, the company’s new CEO.
The past six months hasn’t marked the first time Ladbrokes has made an attempt to acquire Coral. Ladbrokes tried to buy Coral 17 years ago but was unable to due to various regulatory laws. Ultimately they failed to cement the merger’s terms of agreement.
The motive behind this risky business move is that Ladbrokes has been suffering financially. When internet-based sportsbooks began opening for business, Ladbrokes lost much of its business to new competition. Taking over Coral would in theory help Ladbrokes reclaim lost ground and compete with William Hill – the current market leader in the UK.
Another reason for the proposed merger is tougher taxes and higher regulations that were imposed very recently. The point of consumption tax just went into effect in December 2015 and is specifically geared towards gambling profits generated in the United Kingdom.
While the merger seems quite attractive, the company must still overcome a few obstacles in order for it to happen. Right now Coral has around 1,850 betting shops and Ladbrokes is sitting at about 2,200 shops. Combined, it is unlikely that a regulator would approve the merger due to the UK strict anti-monopoly laws.
Regulatory issues may still cause trouble
The biggest reason that the 1998 Ladbrokes Coral merger failed could still be the downfall of the current one. The deal must be approved by the Competition and Markets Authority (CMA) – a regulatory authority which acts to protect markets in the UK and could view the merged company as having an unfair advantage.
The combined company would host more than 4,000 betting shops, making Ladbrokes Coral the largest bookie in the United Kingdom. The second largest betting operation in the UK would be William Hill which sits at around 2,300 shops. The concerns about size will potentially mean that both Ladbroks and Gala Coral will be forced to sell shops.
In preparation for dealing with the CMA, Gala Coral sold off 130 of its bingo clubs in December for £241 million. The Gala Bingo retail division was bought by Caledonia Investments Plc. The details of the sale include that both the Gala brand and websites for Gala Bingo will be retained by Gala Coral, but through a licensing agreement the bingo clubs will continue to do business under the Gala name.
In the official press release from Gala Coral Group, Carl Lever, Chief Executive of Gala Coral, made a statement about the sale’s completion:
“We are very pleased to have completed the sale of Gala Retail. The disposal is another transformative step for Gala Coral, following the turnaround of the business over the past few years. We wish the Gala Retail team all the very best for the future and believe the business will continue to thrive under its new owners. Gala Coral remains focused on growing and developing our retail bookmaking and online businesses, and concluding the proposed merger with Ladbrokes.”
What happens if the deal goes through?
Combined, the merger would make Ladbrokes Coral the largest sportsbook in the United Kingdom. Consumers will be able to take advantage of more locations with a single betting account and utilize promotions more easily. It also removes a competitor from the landscape which could make line shopping tougher on consumer. But as the company itself will argue to the CMA, in the age of the internet there’s no shortage of places to place wagers.
In an interview with The Telegraph, Ladbrokes’ Mullen spoke candidly about himself, the merger, and his predecessor Richard Glynn:
“I got on well with Richard; he made some informed decisions and some of the bets didn’t pay off. But I’ve been the CEO for eight months now, so you need to starting looking at Jim Mullen.”