The Competition and Markets Authority in the U.K. said that bookmakers Ladbrokes and Gala Coral will have to sell 350 to 400 stores if the proposed 2.3 billion-pound merger is to be pushed through.
The competition regulator said that the proposed merger between the two companies are combining the second and third largest betting companies which would result in a reduction of betting shop chains giving customers less options in “a large number of local areas.”
Ladbrokes runs over 2,200 shops in the country and Gala Coral operates 1,850. The merger of the companies will make it the largest bookmaker in terms of the number of shops in comparison to current market leader, William Hill which has 2,400 stores.
“We’ve provisionally found that the merger between two of the largest bookmakers in the country may be expected to reduce competition and choice for customers in a large number of local areas.” Martin Cave, chairman of the CMA’s inquiry into the proposal said.
“Discounts and offers of free bets to individual customers are ways betting shops respond to local competition which could be threatened by the merger. We’re also concerned that such a widespread potential reduction in competition at the local level could worsen those elements that are set nationally, such as odds and betting limits,” he added.
After the CMA’s announcement, Ladbroke’s shares opened 7 percent higher to 128p in Friday morning’s trading. The company was the biggest early riser on the FTSE 250, resulting from the CMA’s announcement, which Ladbrokes considers as a significant step toward the merger.
“Our focus now will be agreeing the remedies with the CMA and finding the appropriate buyer or buyers for the shops,” Cave said.
The CMA aims to finish the final report by the end of July after considering responses to their initial findings. The deadline for the responses will be on June 13.
Cave said, “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.”
In the last 20 years, Britain’s betting shops have transformed allowing for the flourishing of the online gambling industry with bookies training their staff to watch out for issues that are present in casino-style machines.
As some shops are on the brink of bankruptcy, it is apparent that the merger between Ladbrokes and Gala Coral shows a still-profitable industry.
According to analysts, despite the merged company selling hundreds of shops, it would still be a dominant player in the market.
Coral’s all-share merger proposal was agreed by Ladbrokes in July with the company’s shareholders backing the decision in November.
Private equity firms Apollo Global Management, Cerberus Capital Management, Anchorage Capital Partners and Park Square Capital own Gala Coral after it collapsed under 2.5 billion pounds in debt.
The terms of the deal states that the private equity holders that own Gala Coral will hold 48.25 percent of the merged company’s shares. The remainder of the shares will be held by Ladbrokes shareholders.