Ladbrokes Coral in £3.9bn takeover talks with bookmaker GVC Holding

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Bookmaker GVC Holdings has offered to buy Ladbrokes Coral for up to $5.2 billion to create a global online and high street betting giant able to take on rivals and cope with a tougher regulatory environment.

GVC, which is listed on the FTSE 250 with a market cap of under £3bn, said the possible offer would see it offer a mix of cash and shares, plus a further value of up to 42.8p structured as a "contingent value right" determined by the outcome of the government's triennial review into gaming machines in the bookmaking industry.

Ladbrokes Coral and GVC Holding said that Thursday's announcement does not amount to a firm intention to make an official offer.

GVC chief executive Kenneth Alexander is expected to lead the combined group, although the firms said plans for the final management line-up would be worked out over the coming weeks.

According to the statement, the purchase price would depend on the outcome of the highly-anticipated triennial review into the United Kingdom gambling industry, in which the government is expected to call for a significant reduction in the maximum stake playable in fixed odds betting terminals. Last year GVC bought Btwin.party, while Ladbrokes and Coral merged.

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It would lead to Ladbrokes Coral shareholders owning about 46.5% of the combined group and GVC about 53.5%. Discussions in the summer broke down over a price dispute shortly before the government's gambling review.

The companies added that a merger would enhance the enlarged group's position in a number of regulated online gaming markets, including the UK, Italy and Australia, and would boost GVC's current share of revenues from locally regulated and taxed markets to more than 90%.

Ladbrokes Coral was created out of the merger of Ladbrokes and Gala Coral in November previous year. There could also be synergies from the deal, while the Board of GVC also believes that the transaction would be double digit EPS accretive from the first full year post-completion.

The CVR is calculated on a sliding scale based on what maximum stakes are imposed under the triennial review, with £0 worth 0p, £20 worth 30.3p per share and £50 worth 42.8p.

"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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