20th May 2016 07:57
LONDON (Alliance News) - The UK Competition & Markets Authority on Friday said betting company Ladbrokes PLC may have to dispose of around 350 to 400 shops ahead of its merger with Gala Coral, although this only equates to just under 10% of the combined estate of the merging bookies.
The news sent shares in Ladbrokes up 10% to 131.67 pence on Friday morning, with the market perhaps expecting the CMA's review into the merger to result in a worse outcome. Ladbrokes was the best performer in the FTSE 250 in early trade.
In its review, the CMA said it provisionally found that the merger may give rise to competition concerns in a large number of local areas, meaning Ladbrokes may have to sell around 350 to 400 shops in order for the concerns to be resolved and clearing the path for regulatory clearance.
Ladbrokes and Gala Coral are the second and third largest bookmakers in the UK by number of shops, behind William Hill PLC. Ladbrokes operates 2,231 betting shops in Great Britain, while Gala Coral operates around 1,850 betting shops in the UK.
Combined, this would give Ladbrokes and Coral a total of 4,081 shops in the UK, while William Hill has 2,370. Even in the event the remedies result in 400 Ladbrokes-Coral shops being sold, the combined company would still be significantly larger than its nearest competitor and would only reduce the combined Ladbrokes-Coral estate by less than 10%.
The CMA said it has identified 659 local areas where it provisionally found that the merger may be expected to result in a substantial loss of competition, which could lead to a worsening of the offer made to customers at both a local and national level.
The CMA has extended its deadline for its final report by eight weeks to August 19 "in view of the scope and complexity of the investigation", although it is aiming to publish the final report by the end of July.
The CMA said it has not found competition problems that may be expected to arise from the merger in relation to other parts of the two businesses.
"We'll now consider responses to our provisional findings before coming to a final decision. If our provisional findings are confirmed and divestiture would be a suitable remedy, Ladbrokes/Coral may have to sell a large number of shops to a suitable purchaser or purchasers in order to preserve competition in those local areas," Inquiry Chair Martin Cave said in a statement.
"We'll need to look closely at the exact number of shops and areas that would be involved - the overall size and complexity may mean that the sales need to be substantially completed before the merger can go ahead," Cave added.
Ladbrokes and Gala Coral agreed the merger in July last year. It will create a company, to be called Ladbrokes Coral PLC, with a market capitalisation of around GBP2.1 billion and the largest bookie retail estate in the UK.
By Karolina Kaminska; [email protected] @KarolinaAllNews
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
WMH.LLAD.L