Business Irish

Friday 23 August 2019

Ladbrokes deal 'to be approved' despite battle with Desmond

Rival bidder could still gatecrash the proposed €2.85bn merger with Coral, writes Business Editor Nick Webb

Market sources have suggested that Desmond’s criticism of the €2.85bn merger could prompt another bidder to look at gatecrashing the deal
Market sources have suggested that Desmond’s criticism of the €2.85bn merger could prompt another bidder to look at gatecrashing the deal

Nick Webb

Billionaire dealmaker Dermot Desmond expects the bulk of Ladbrokes shareholders to agree to the gambling firm's under-fire €2.85bn merger deal with rival Gala Coral, despite his vehement opposition to the deal.

The financier will travel to London to address Ladbrokes shareholders at a meeting to approve the deal on Tuesday, having achieved his intentions to raise concerns over the deal.

Market sources have suggested that Desmond's criticism of the €2.85bn merger, by highlighting a perceived lack of value for Ladbrokes shareholders, could prompt another bidder to look at gatecrashing the deal.

Desmond, who is the largest individual shareholder in Ladbrokes, with a 2.8pc stake, has hit out at the merger deal as he thinks Ladbrokes shareholders will lose out.

Over the weekend, Ladbrokes advisors have been painstakingly counting shareholder proxies to determine whether management has secured enough votes for the deal to proceed. More than 50pc of the votes cast need to be in favour of the Coral merger for it to go through.

"We are uncomfortable with the transaction. We think it is a deal that should not happen," a spokesman for Desmond's investment goup IIU told the Sunday Independent.

"We don't expect to overturn the vote on Tuesday, but we want to raise the level of discourse with shareholders."

It is understood that IIU has met with around six of Ladbrokes' top shareholders, institutions that hold close to 20pc of the shares in the company, to raise their concerns.

Last week, Ladbrokes upped the ante in a bid to woo wavering shareholders by insisting that the deal has "compelling strategic rationale and benefits."

Desmond has also complained to the UK takeover panel about the level of disclosure that Ladbrokes has made and about the eligibility of its largest shareholder, Playtech, to vote on the deal.

He has told investors that lost profits from up to 1,000 betting shops that the merged company could be forced to sell off by competition authorities could far outweigh the £65m in cost savings from the deal. He has also warned that higher betting-machine takings were vulnerable to regulation and that a £75m (€106m) settlement of Ladbrokes' software deal with the Israeli specialist Playtech was expensive. Ladbrokes shares have tumbled over 20pc since the proposed deal was announced last summer.

Desmond has been a shareholder for around nine years and upped his stake when selling betting exchange Betdaq to the gambling firm in 2013.

The IFSC financier, who made his fortune from spectacularly profitable investments on the likes of Baltimore Technologies, Man Utd, Greencore and Optimal Payments, has been an activist shareholder at Ladbrokes and pushed for the development of a more profitable strategy.

Since 2010, Ladbrokes has had three chief executives.

The GalaCoral merger with Ladbrokes is an extremely complex transaction and has a number of regulatory hurdles to vault before it can be approved. The merger must be cleared by the British Competition and Markets Authority.

"The deal won't close on Tuesday. It could be nine months before completion," the IIU spokesman added.

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