Ladbrokes/Coral Merger - Love on the Rocks?
In response to press speculation, Ladbrokes confirmed that it was in discussions with the board of Gala Coral Group Limited regarding a possible merger of Ladbrokes and Coral Retail, Eurobet Retail and Gala Coral's Online businesses, to create an enlarged business which would be listed on the official list of the UK Listing Authority and traded on the main market of the London Stock Exchange.
Shareholders were advised that there could be no certainty that the discussions between Ladbrokes and Gala Coral would lead to any agreement concerning the possible merger or as to the timing or terms of any such agreement and that there could be no assurance that, even if reached, any such agreement would be completed. Ladbrokes also noted that, in the event that such a transaction proceeds, it may undertake a non pre-emptive equity placing to strengthen the balance sheet of the Combined Entity. Doh ....
Jim Mullen, CEO Ladbrokes plc, said; "Since becoming CEO my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced and I look forward to presenting them to shareholders. A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies' shareholders. The Board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms."
Comment: Ladbrokes and their beleagured shareholders need this merger. That the merger has been proposed reveals the precarious position in which the one time industry leader finds itself. The city will celebrate the news, but, if it were to fail, Ladbrokes shares will get hammered. Were it to succeed, it will bring scale, but there is no gauarantee that it will resolve the online and reputational problems that both companies face on a standalone basis. And on this point, the news that both companies may retain their brand names under the merger represents something of an own goal. One thing that is certain, is less choice for the punter. I think that it is pertinent to point out that there are already people out there who were sucked in by the story of the Ladbrokes and Coral merger, who are looking at 10%+ losses on the day (shares hit a high of 147p in the wake of the merger news, but are now trading at 131p). Will the Racing Post headline tomorrow be; Ladbrokes shares fall back 12% after early merger euphoria dies down - many small punters get their fingers burnt again? I somehow doubt it.
Betfair's Chinese Wall
Gerald Corbett is Betfair’s Chairman, a position he assumed in March 2012. He is also currently Chairman of Numis plc, the stock broking and investment banking business based in the City. On June 5 shares in Betfair fell 5.1% after Numis said that the bookmaker did not merit the “unicorn status” implied by its high valuation (30 X 2017 earnings). Numis analyst Ivor Jones said: "A horse with a stick on its nose is not a unicorn, we believe this is an excellent business but that the share price has got ahead of itself."
Having hit a high of £26.98 on June 5th, shares in Betfair are currently trading at £24.06 - a fall of a somewhat significant 12%. Shares in Betfair hit an all time low of £ 5.86p on August 10 2011 - Did somebody say Icarus?
It should be noted that following Betfair's decision to integrate its Exchange and Sportsbook platforms, the
company no longer provides seperate results for its betting exchange. This of course makes any analysis of the betting exchange's
future performance impossible. It is also uncertain, at this point in time, the extent to which (if at all) Betfair may recycle the funds of its sportsbook's customers' back into its betting exchange - a question I have raised with the Gambling Commission.
Channel 4 remains in denial
If evidence were ever needed that horse racing is going down the pan, ably assisted by the brains trust at C4, it was provided with the news that the 2015 Epsom Derby audience peaked at 1.47m, compared with 1.55m in 2014, and down from 3.3m when the race was last shown by the BBC in 2012 Aross the five afternoons of Royal Ascot, Channel 4 secured 2.86 million viewers, a fall of 1% compared with 2014, and a loss of 4m viewers on the BBC's 2012 total of 6.9m. The muppets at C4 had the audacity to come out and speak about an increase in the key demographic audience - jokers. Channel 4 remains in denial and the soon the Tories lay out their plans to privatise the company, the better. As for how to boost the ratings - a full root and branch clear out is needed. That people are crawling out of the woodwork to suggest Matt Chapman as the answer to the problem, serves to reveal just how bereft of talent and ideas we are. TH
Coral Eclipse 2015 Implied Probabilities
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