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Kenny Alexander is hoping it will be third time lucky as he aims to complete one of the biggest deals in the gambling industry.
The chief executive of GVC, the online betting company, has led two previous approaches for Ladbrokes Coral, the UK bookmaker, over the past year. According to people close to the talks, those past negotiations broke down as board members, shareholders and industry analysts asked: “What’s the rush?”.
On Thursday, GVC said it was once again in “detailed discussions” over a takeover of Ladbrokes Coral, worth up to £3.9bn. Both sides are confident negotiations will be more fruitful this time.
The previous attempts to bring together GVC and Ladbrokes stumbled because of uncertainty around the government’s review on fixed-odds betting terminals (FOBTs) — in-store machines that have been dubbed by critics as the “crack cocaine” of gambling but are the largest source of revenues for some bookmakers, including Ladbrokes Coral.
While ministers announced in October that there would be a crackdown on the maximum stake for these machines, the final decision on where that limit will be fixed is not due until next month, making it difficult to assess the value of each company.
But Mr Alexander insisted they must act now.
“You could wait forever,” he said. “People in this industry have been talking for years about consolidation, consolidation, consolidation. We are very ambitious, and very aggressive. They have been sitting on their hands. I don’t know what they’re waiting for.”
To deal with the uncertainty, GVC has proposed what Mr Alexander describes as a “clever” solution — a sliding scale that will change the final acquisition price according to how hard Ladbrokes Coral is hit by the FOBT curbs. These will reduce the maximum stake on the machines from £100 to between £50 and £2.
GVC has valued Ladbrokes Coral at £3.1bn at a minimum, but the final price could move up to £3.9bn. The deal structure is intended to reassure Ladbrokes Coral shareholders that they are getting a good price regardless of the impact of the new regulations.
Other hurdles to a deal have also been removed. Last month, GVC sold its Turkish business for about €150m, marking a shift away from its successful strategy of targeting “grey markets” — untaxed or unregulated areas.
In past discussions, the Ladbrokes Coral board had expressed strong reservations about GVC’s Turkish business owing to concerns about the country’s regulatory position. People close to the high street bookmaker said it was continuing due diligence on GVC to be certain there were no Turkish revenues remaining in the business.
GVC also waited to reignite takeover talks until after the government revealed its budget last month. There was relief when Philip Hammond, the chancellor, did not reveal any surprise tax rises for the gambling sector.
People close to the parties said Mr Alexander had been motivated to act fast in order to take advantage of GVC’s high share price, which has risen by a third over the past 12 months, helping to position the company as the acquirer of its longer-established competitor.
There has also been a nagging suspicion that others could enter the fray to scupper a deal. The Financial Times has revealed details of talks between GVC and Ladbrokes over the past 12 months, with one person close to the negotiations saying a fear of further leaks led to Thursday’s announcement.
“It has happened quite quickly,” the person said. “We’ve learned nothing stays a secret, so we would rather get on with it.”
The companies said a combination would help GVC expand in the UK and Australia, two of the world’s largest regulated gambling markets, while Ladbrokes Coral would gain greater expertise in internet gambling.
In a note, analysts at Barclays agreed with this assessment, saying the deal “makes sense” for Ladbrokes Coral shareholders but added that it was “not without risk,” in particular with the tricky task of integrating technology platforms between the two entities.
By jumping the gun on the expected rush towards consolidation, GVC and Ladbrokes Coral believe they are getting a crucial headstart.
Other gambling companies, particularly those with UK businesses, have been preparing for a fresh round of consolidation for months, with many expected to make their moves once the FOBT curbs are finalised.
In particular, high street bookmakers are looking to bolster their online businesses in order to grapple with upstarts such as Bet365 and 888 Holdings.
“If you’re going to succeed in this industry in the next few years, you have to have scale and be diversified,” said Mr Alexander.
Profile: Kenny Alexander
A keen poker player and a lover of horseracing, Kenny Alexander is placing another big bet as chief executive of GVC.
The proud Scotsman and fanatical supporter of Kilmarnock football club — whose family lives in Perth — Mr Alexander began his career as a chartered accountant at Grant Thornton.
He entered the gaming industry in 2000 after joining online group, Sportingbet. He rose through the ranks to become chief executive of GVC in 2007, and since then has masterminded a series of acquisitions that have rapidly expanded the company.
In 2015, he beat competition from rival 888 Holdings to acquire Bwin.Party for £1bn. Further rapid growth was achieved by targeting underserved international markets.
His move for Ladbrokes Coral is seen as a way of switching tack, giving GVC a more secure foothold in established markets in the UK and Australia, rather than relying on riskier, unregulated countries.
“If Kenny played chess, he would be four moves in front of you,” said Ralph Topping, a former chief executive of William Hill. “Most importantly, he’s not made a mistake yet.”