A proposed merger between two of the biggest bookmaking companies in the UK will be cleared by authorities on the condition they sell off hundreds of betting shops.
According to a press release last Friday by the sector watchdog, The Competition and Markets Authority (CMA), the deal could severely hamper smaller competitors and slimming down on the number of storefronts will be needed.
Ladbrokes plc, former owners of the Hilton hotels, and Gala Coral Group Ltd, owned by a consortium of private equity firms, will have until mid-June to offer counter arguments to the details within the report including the condition that up to 400 shops will need to be closed.
Gala Coral, headquartered in Nottingham and Gibralter, has eighteen hundred betting shops across the UK and has its bingo operations in 137 clubs across the nation.
Ladbrokes are a slightly bigger firm with over 2000 stores and is listed on the London Stock Exchange. The deal was initially agreed on this time last year.
The biggest UK betting company currently is William Hill, which operates worldwide and employs over 16,000 staff. If the merger goes through the new Ladbrokes-Coral company will eclipse the market leader.
A spokesman for CMA, Martin Cave said, “Although online betting has become relatively popular, we feel that physical shop fronts are still very popular to a significant number of customers. And it is these people who stand to lose out if a high street monopoly is formed and this is why we feel conditions for this proposed merger are necessary.”
Cave added that a final report would be published by the end of next month.
In response to the preliminary findings from the CMA, Ladbrokes said, “We respect the initial findings of the report and are determined to reach an agreement with the CMA regarding the number and location of shops we need to terminate.”
The merger is said to be priced in the region of 2.4 billion pounds, and Ladbrokes shares climbed 6.7 percent with the recent news. Experts say the newly formed company will not be overly affected by the proposed shop closures.
Jonathon Price, Director of Mergers & Acquisitions at Nikko Holdings commented in an email to clients yesterday, “Ladbrokes-Coral looks like it will be the dominant force In the UK betting sector regardless of the CMA’s enforced shop disposals. With the amount of overlap the two firms have in the field we are going to see substantial cost savings.”
