Friday 20 January 2017

Dermot Desmond critical of Ladbrokes' €3.2bn deal

Published 19/11/2015 | 02:30

Dermot Desmond
Dermot Desmond

Billionaire financier Dermot Desmond has severely criticised the planned €3.2bn merger of betting firms Ladbrokes and Coral. Mr Desmond urged fellow Ladbrokes shareholders to reject what he called a "disastrous path" for Ladbrokes.

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In a scathing letter to Ladbrokes' shareholders yesterday, he claimed that the proposed merger between the two firms is not a good deal and suggested that Ladbrokes should be sold.

Mr Desmond owns at least 1pc of Ladbrokes and possibly more, according to a Ladbrokes spokesman. While the precise size of the holding is unclear, it is less than the 3pc level that would trigger automatic disclosure to the stock market.

Mr Desmond has held a stake for nine years and received additional shares in Ladbrokes when he sold his Betdaq betting exchange in 2013 to the company for up to €43m.

The planned merger between Ladbrokes and Coral was announced during the summer amid consolidation in the industry. Rivals Paddy Power and Betfair are also merging.

Ladbrokes has struggled to develop a meaningful digital platform, positioning it behind rivals in a sector where consumers are migrating in significant numbers to online services.

Mr Desmond, who's also a shareholder in INM, the publisher of this newspaper, told Ladbrokes' shareholders that the merger is being championed by the gambling company's chairman, Peter Erskine, and chairman designate, John Kelly.

"They have led Ladbrokes down the disastrous path to a deal that is effectively the death of Ladbrokes as an independent company," Mr Desmond claimed. He has also published an extensive 58-page document online detailing the reasons for his opposition.

Mr Kelly was previously the chairman and chief executive of Coral. "He left having taken on excessive debt and which, as a consequence, had to be restructured to the detriment of the shareholders shortly after he left," Mr Desmond claimed.

He added: "The real winners in this transaction are the Coral shareholders. Make no mistake - this is a zero premium acquisition of Ladbrokes by Coral. The Coral shareholders receive access to liquidity for their shares and significant relief from a £2.2bn (€3.1bn) debt burden."

Mr Desmond claimed Ladbrokes needs new management to help migrate customers to online services.

"However, giving away half your company and taking on over £800m of debt is a very expensive way to recruit a quality management team," he said.

Ladbrokes said the company has had "significant dealings" with Mr Desmond as a shareholder and commercial partner.

"We note his views and are not surprised by them as he has been in extensive dialogue with the management team and not been afraid to talk of undertaking such action.

"As a shareholder he has a right to express his view and to vote accordingly at the EGM next week.

"We remain confident that shareholders see the attraction of the proposed deal and continue to work towards a successful conclusion to the deal."

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