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

Winning Poker, Americas Cardroom Making Waves at Amsterdam Affiliate Conference

Winning Poker Network and its flagship brand, Americas Cardroom, are in Amsterdam welcoming affiliates and would be affiliates at the Amsterdam Affiliate Conference (AAC).

You Can Now Play the Minnesota State Lottery on This Phone App: Powerball, Gopher 5, More

Minneapolis, MN - Individuals in Minnesota can now order state lottery tickets and play games on their phone after Jackpocket announced that it has launched its app throughout the state.

FunFair Technologies Unites With Poker Affiliate RaketheRake

FunFair Technologies Unites With Poker Affiliate RaketheRake

Decentralised B2B blockchain casino platform, FunFair Technologies will be joining forces with the market-leading poker rakeback affiliate, RaketheRake.

EvenBet Gaming News

EvenBet Gaming News

Gambling911.com has your news related to gaming developer EvenBet Gaming here

EvenBet Gaming Introducing New Mixed Games Variants at iGB Affiliate Live 2018

EvenBet Gaming Introducing New Mixed Games Poker Variants at iGB Affiliate Live 2018

EvenBet Gaming will be introducing its new Mixed Games at this week's iGB Live! in conjunction with its Amsterdam Affiliate Conference (AAC).

Syndicate