Wednesday 21 February 2018

Paddy Power likely to eye UK outlets after Ladbrokes merger

Ladbrokes and Gala Coral may have to sell outlets
Ladbrokes and Gala Coral may have to sell outlets
Ladbrokes and Gala Coral may have to sell outlets
John Mulligan

John Mulligan

Paddy Power is expected to be among the bookmakers that will eye hundreds of outlets controlled by rivals Ladbrokes and Gala Coral after the two British operators announced a £2.3bn (€3.2bn) merger yesterday.

The merger, which has been rumoured for weeks, will create the UK's biggest bookmaker.

The combined group, which will be known as Ladbrokes Coral, will have about 4,000 outlets.

To satisfy competition concerns, it's likely to have to sell hundreds of outlets. Paddy Power, which already had 321 shops in the UK at the end of last year, could see any disposals as an opportunity to expand.

Ladbrokes, whose Irish operation is currently in examinership, has been battling poor performance for some time.

It had lagged rivals including Paddy Power in investing in its digital offering. Ladbrokes' chief executive, Jim Mullen, will be in charge at the newly-merged business. He was appointed chief executive earlier this year and set about trying to revitalise the company.

Ladbrokes posted revenue of £1.1bn (€1.5bn) last year, up just 3.8pc on the previous year. It made a group operating profit of £125m (€176m), which was 9.3pc lower than in 2013.

In 2013, Ladbrokes acquired financier Dermot Desmond's Betdaq betting exchange for up to €43m. That purchase price included €15m in cash and €18.6m in Ladbrokes' shares.

Gala Coral is smaller than Ladbrokes, but is perceived to have tackled digital and other challenges better than its bigger peer. Gala Coral is owned by private equity investors including Apollo, Cerberus and Anchorage.

It has about a 22pc share of the UK retail market, making it third-biggest operator. In the financial year to the end of last September, the company generated turnover of £1.23bn (€1.7bn) and earnings before interest, tax, depreciation and amortisation of £235m (€332m).

The figures were each up 14pc on the previous year. It has an estimated 5pc share of the UK online market, having invested £50m in new online platforms in 2012. The company also operates in Italy. Its bingo business is being sold separately and doesn't form part of the merger.

Paddy Power's UK retail operations made an operating profit of €21.2m last year, which was up 53pc on 2013. That was on net revenue of €174m.

Its total UK business generated an operating profit of €91.7m in 2014, up 10pc on 2013. It increased the number of outlets it has in the UK from 266 in 2013 to 321 last year.

Ladbrokes' Irish arm was placed in examinership in April. It has close to 200 outlets here and has sought to close 60. Boylesports had been interested in acquiring its business here, but the examiner backed Ladbrokes' plan for the operation.

Ladbrokes and Gala Coral said their merger will create a "leading multi-channel and internationally diversified business with a compelling strategy to accelerate online growth, deliver substantial synergies and drive value".

"This is a major strategic step for Ladbrokes," said Ladbrokes' chairman Peter Erskine. Ladbrokes' shareholders will own nearly 52pc of the newly- combined business following a share placement.

Former HBOS chief executive Andy Hornby will reportedly be the new chief operating officer of the merged group.

Irish Independent

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