Ladbrokes Coral has announced it is having "detailed discussions" about a potential takeover by rival GVC Holdings in a deal that could be worth up to £3.9bn. Based on these terms, GVC shareholders would hold roughly 53.5% and LCL's 46.5% of the enlarged business.
It is expected that the proposed offer would include a mix and match facility whereby Ladbrokes Coral shareholders may elect to receive more cash or more shares in GVC, subject to offsetting elections being made by other Ladbrokes Coral investors.
Ladbrokes has almost 3,700 bookies on the high street, while the Isle of Man-based GVC has a raft of brands after a series of acquisitions, most recently snapping up bwin.party in February 2016.
Shares in the 230-year-old Ladbrokes jumped 26 percent in early trading, while GVC shares rose 6 percent on confirmation of the long-rumoured offer, which is in cash and shares. On Thursday they said GVC had made a non-binding cash and shares offer to Ladbrokes, with the final price determined by the outcome of the government's review into gambling machines in United Kingdom betting shops, which could hit profits at the target company.
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"The boards believe that a transaction has the potential to create material shareholder value and that there is a compelling strategic rationale for the possible offer", said Ladbrokes Coral and GVC in a joint statement.
The news comes just a year after Ladbrokes and Gala Coral completed a merger.
"The enlarged group would be an online-led globally positioned betting and gaming business that would benefit from a multi-brand, multichannel strategy applied across some of the strongest brands in the sector".
In addition, the companies have agreed that should the deal go through, Kenneth Alexander, now chief executive of GVC, would take on the same role at the enlarged group. In October it started a 12-week consultation to consider cutting the stake to between 50 pounds and 2 pounds, from the current 100 pound wage.
"GVC got lucky at the third attempt and LCL shareholders can count their winnings", said analyst Neil Wilson at ETX Capital.
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