On Thursday, Online gambling group GVC made a bid for a UK betting firm Ladbrokes, Coral, in an offer just shy of 4 billion. Should the bid be successful, the combined company will become one of the world’s largest online and retail gambling groups, and will subsequently be propelled into the FTSE 100 with a total market capitalisation somewhere in the ballpark of £5.3bn.
This is not the first time GVC has taken action to acquire Ladbrokes, so there is no guarantee that the deal will go ahead. However, as it currently stands both parties seem likely to benefit immensely from the merger. That is, a few months back, GVC went so far as to sell off it’s Turkish operations, as Ladbrokes saw them as a potential deal-breaker. What’s more, GVC is currently edging away from so-called ‘gray-markets’, such as that of Turkey which has recently experienced a gambling crackdown, and buying Ladbrokes, in turn, would give the company a solid entryway into the UK and Australia, two of the world’s biggest legitimate gambling markets. Additionally, combining GVCs technology with Ladbrokes physical footprint of betting shops would also be a smart move, akin to the successful merger of Paddy Power and Betfair a few years previously.
Spectators predict that this move may be the first of a deal spree in the UK gambling sector, as the UK government is gearing up to conclude a major review of the gambling machines that are ubiquitous in bookmakers (wherein maximum bets are likely to be slashed, thus hurting gambling firms revenue). It seems likely that once this regulatory uncertainty is cleared up, a flock of gambling firms will explore the idea of merging in an effort to tackle an overcrowded market. So it seems as though in a high-stakes business sector, GVC and Ladbrokes may be trying to get ahead of the game.
Nevertheless, it seems that America could be the ultimate prize for the potential hybrid company, as the US Supreme Court is hearing arguments this week on whether sports-betting should be legalized on a national level, as opposed to just in Nevada and a handful of other states. It may take as long as six months before the court’s final decision is announced, however, if the floodgates are opened across the US, international firms with existing expertise and gambling technology, such as the combined power-house of GVC-Ladbrokes, could be seriously big beneficiaries.
What’s more, the market is reacting strongly to the news. Shares in Ladbrokes Coral surged on Thursday, rising more than 24 per cent to 168.7 per share. GVC shares had been trading as low as 892 on Wednesday, yet currently sit at 965 as of Friday morning trading, suggesting that investors are confident that the merger will indeed go ahead.