GVC Plays Regulatory Roulette With Ladbrokes Bid

Written by:
C Costigan
Published on:
Dec/07/2017

LONDON (Reuters) - Bookmakers adjust the odds to make sure they can make money whatever happens. GVC’s 3.9 billion pound bid for Ladbrokes Coral Group is trying to do something similar, by using financial engineering to hedge the risk of a government clampdown on its target’s business.

The Foxy Bingo owner’s announcement on Thursday, the third time in a year it has been in talks with the bookmaker, was a surprise. Most analysts had expected GVC to wait until the outcome of a regulatory review of fixed-odds betting stakes, expected early next year, which could knock a fifth off of Ladbrokes’ operating profit, according to Investec.

Moving quickly makes sense. There’s strong logic behind a tie-up, which could create a group spanning traditional bookies, digital sports-betting and online bingo. Berenberg analysts reckon slashing costs could bring 160 million pounds of savings. Taxed at Ladbrokes’ 15 percent rate and capitalised, they’re worth 1.4 billion pounds, over half its undisturbed market capitalisation. The enlarged group would also be well-positioned to expand into the U.S. if the Supreme Court finds in favour of legalising sports betting.

The key to the deal is a funky contingent value right, which will pay out different sums depending on the outcome of the review, which is likely to set a cap on gamblers’ stakes. Using GVC’s Wednesday closing price and assuming the most benign outcome of the consultation, the deal values Ladbrokes’ equity at 3.9 billion pounds. If the government caps stakes at 2 pounds, likely to do serious damage to the business, the bid is worth 3.1 billion pounds. That range of outcomes roughly matches the potential hit to operating profit.

But GVC is still taking a risk. The contingent value rights are structured around seven discrete stake caps. But the measures might fall outside that range if the government tries other means of discouraging fixed-odds machines, like setting minimum time periods for games. GVC’s hedge might not cover the full extent of the damage. In that case, an as yet unidentified independent expert would get a say, but it could get messy. The benefits of moving quickly probably outweigh those risks, but GVC’s bid isn’t as perfectly hedged as it seems. initiative."

Gambling News

Man Claims Casino Responsible for Amputated Foot

Man Claims Casino Responsible for Amputated Foot

Howard Thompson claims that the sun deck at Harrah's Casino in Philadelphia is responsible for partially cooking his foot, resulting in an amputation.

The state of Maryland is inching closer towards legalizing sports wagering.

Bill Seeks to Legalize Sports Betting in Maryland

The state of Maryland is inching closer towards legalizing sports wagering.

Sports Betting Could Have to Contend With Insider Trading Laws

Sports Betting Could Have to Contend With Insider Trading Laws

Andrew Mentock of ozy.com details how insider trading laws could soon impact the world of sports wagering.

Sites Like Draftkings Sportsbook - Alternatives

Sites Like Draftkings Sportsbook - Alternatives

Tired of Draftkings or just looking for a companion site to maximize value?  Below we feature Draftkings alternatives.

AAF Here to Stay With MGM Investing Heavily in Betting Technology

AAF Here to Stay With MGM Investing Heavily in Betting Technology

In its first week, the Alliance of American Football (or AAF) surpassed all expectations, posting impressive ratings its first night and ranking as the most downloaded app Sunday.  But the real focus will be long-term on sports gambling data and technology.

Syndicate