Only three months after taking over the executive leadership of embattled Ladbrokes, new CEO Jim Mullen has become the talk of UK corporate business following the shock news of a potential merger with Gala Coral.
This week Ladbrokes share price jumped 14% in the wake of the announcement, Mullen and Ladbrokes governance have stated that the merger talks are real and progressing. If the merger becomes a reality Mullen and Gala Coral CEO Carl Leaver will have formed the UK’s largest retail betting operator with 4000 stores (9000 UK total), as well as gaining 2/3 largest online business presence.
However the heavyweight merger would have to clear regulatory and competition hurdles, both operators have stated that merger plans and development would take over a 12 month period to be processed.
A Gala Coral Ladbrokes tie-up was rejected in 1998 by Peter Mandelson, the then Trade and Industry Secretary on competition clauses. Industry analysts have pointed that if talks proceed, the UK Competition and Markets Authority would have much to investigate regarding the proposed transaction.
Speaking to The Independent newspaper Jim Mullen remained defiant regarding merger hurdles
“That was back then. The dynamic is quite a different one from where it was. You’ve got a whole online market that wasn’t there for a start, so that has a major influence. But to be clear – there is a competition process to continue and we will liaise with authorities as appropriate”.
Mullen the man tasked with leading a Ladbrokes turnaround, stated that the merger would benefit “scale”, with corporate savings being reinvested into boosting the operator’s online division. Both operators’ governance have stated that the merger would maintain all core online and retail brands.
Mullen’s bold move will likely have started a further frenzy in takeover activity within the sector, which needs to respond to cost saving measures and revenue margin sustainment, which have been driven by tax hikes in online gambling.
If given the merger go-ahead, Ladbrokes/Coral may have started an acquisition gold rush for gambling’s mid-tier firms, as large scale operators and investment funds look to secure assets in a saturated market, the movements and actions of Ladbrokes and Gala Coral governance will likely be closely monitored by media and institutional investors in the coming months.