Takeover Alert…As suitors eye up Ladbrokes acquisition

Ladbrokes has been at the centre of takeover speculation this morning, following rumours of a potential £1.6 billion acquisition by rival Paddy Power.

UK news source The Daily Mail had revealed the potential takeover bid by Paddy Power, which saw Ladbrokes Plc share price jump 5% to 127p (at time of writing). The takeover speculation had witnessed +25 million Ladbrokes shares traded, as the operator may have become the target of a rival operator or a cash rich private equity firm.

The speculation of a potential Paddy Power takeover of Ladbrokes operations, may surprise many within the industry. In March 2015 Paddy Power had announced that it would return an investor dividend of €390 million.

Paddy Power who hit record earnings in 2014, recording corporate net revenues of €882 million (FY 2013 – €746 million), had further disclosed that following a review of the market its governance had not found any suitable acquisition targets.

In other Ladbrokes performance related news, financial broker Peel Hunt has today upgraded Ladbrokes stock from ‘hold’ to ‘buy’ position, stating that new Ladbrokes CEO Jim Mullen digitally focused strategy could drive substantial shareholder value and company growth.

Jim Mullen who took over as CEO from Richard Glynn in March, has been busy restructuring Ladbrokes’ executive team. Since taking over Mullen has outlined a digital overhaul to Ladbrokes products and operations. Mullen is set to unveil the operator’s future strategy and plans on 30 June.

Peel Hunt views Mullen’s approach as a positive for Ladbrokes investors, further stating that it is likely that the CEO will undertake a more aggressive strategy with a substantial increase in digital marketing.

Having recorded a continuous share slump since 2006, Peel Hunt believes that Ladbrokes re-structure, combined with changes in the UK gambling market have made it the right time to invest in the operator.

“Our risk-weighted sum-of-the-parts scenarios give us a fair value Given this, together with the M & A activity in the sector, we believe the time is right to get back on the Ladbrokes’ horse”. Peel Hunt commented in a statement