Two Gibraltar based gambling companies are in detailed merger talks

Two Gibraltar based gambling companies are in detailed merger talks

In a joint statement, Ladbrokes Coral and GVC Holdings said: "The enlarged group would be an online-led, globally positioned betting and gaming business that would benefit from a multibrand, multichannel strategy applied across some of the strongest brands in the sector".

Ladbrokes Coral says it is holding "detailed discussions" regarding a takeover offer from rival GVC that values the bookmaker at £3.9bn ($5.2bn).

Kenneth Alexander, chief executive of GVC, will take the helm on the merged company if a deal goes ahead.

The value of this would be determined by reference to the outcome of the current review of gaming machines and its estimated impact on the run-rate profitability of Ladbrokes Coral's United Kingdom business.

GVC - whose shares rose around eight per cent after the talks were announced - said it expects "material synergies" from a merger with Ladbrokes, which it would lay out in any forthcoming firm offer.

Ladbrokes has almost 3,700 bookies on the high street and more than 25,000 staff, while GVC has a raft of brands after a series of acquisitions, most recently snapping up in February a year ago.

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The move comes as gambling groups face tougher regulation, with the government set to crack down on fixed odds betting terminals (FOBTs). Based on these terms, GVC shareholders would hold roughly 53.5% and LCL's 46.5% of the enlarged business.

The Department for Digital, Culture, Media and Sport said in October that the government would cut the maximum bet on the machines from £100 to between £2 and £50.

He highlighted that Playtech may see some potential impact on one of its most important licensees, with its stake in Ladbrokes Coral worth close to 80p per share.

"This triennial review has run and run and run and with the political climate in the United Kingdom who knows how much longer it may well run for?" he said. The reduction is expected to badly hit the income from Ladbrokes Coral's 3,500 betting shops, potentially reducing the firm's net value. Based on results from the first half of 2017, he said that 56 percent of the enlarged company's earnings would come from digital and 38 percent from United Kingdom retail.

He added: "As long as GVC was willing to pay the right price, the tie-up has always made sense - the Isle of Man firm has little debt and has the global and fast-growing online presence; Ladbrokes Coral has the physical footprint, high street name and sports book".

Houlihan Lokey and Investec are advising GVC on the deal, while Ladbrokes Coral is working with Greenhill and UBS.

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