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LONDON BRIEFING: Ladbrokes Coral, GVC Bet On Online-High Street Combo

LONDON (Alliance News) - Maybe some good old-fashioned M&A will get the London market out of ...

Alliance News 7 December, 2017 | 8:02AM
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LONDON (Alliance News) - Maybe some good old-fashioned M&A will get the London market out of its Brexit malaise.

High-street bookmaker Ladbrokes Coral Group and online gambling firm GVC Holdings on Thursday said they are holding talks about a possible merger that would see GVC buy Ladbrokes in a deal worth potentially up to GBP3.90 billion.

The non-binding proposal is for GVC to pay 32.7 pence in cash and issue 0.141 GVC shares for each Ladbrokes share, with a further potential payout of 42.8 pence structured as a contingent value right that will be payable if certain targets are met.

Excluding the potential 42.8 pence deferred payout, the offer values Ladbrokes at 160.9 pence per share, or GBP3.10 billion in total. Including the maximum deferred consideration, the value rises to GBP3.90 billion. Ladbrokes shares closed on Wednesday at 135.70p.

The value of the contingent value right, which would be satisfied by the issue of loan notes by GVC, would be determined by the outcome of the UK Department of Digital, Culture, Media & Sport's current review of gaming machines and social responsibility measures - specifically based on the maximum stake that the review states the gaming machines can take.

Ladbrokes shareholders would own about 46.5% of the enlarged group, while GVC shareholders would own the other 53.5%.

GVC operates some of the leading consumer-facing brands in the online gaming industry, including Sports Book brands bwin, Sportingbet, Betboo and Gamebookers. It also has Gaming brands partypoker, partycasino, CasinoClub, Gioco Digitale, Foxy Bingo and Foxy Casino, as well as B2B brands East Pioneer, Dankse Spil and PMU.

Ladbrokes Coral was itself formed in its present shape only late last year by the merger between Ladbrokes and Gala Coral Group, and the amount of synergies delivered came in much higher than originally expected.

Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 7,344.27
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Hang Seng: up 0.3% at 28,316.98
Nikkei 225: closed up 1.5% at 22,498.03
DJIA: closed down 0.2% at 24,140.91
S&P 500: closed flat at 2,629.27
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GBP: soft at USD1.3370 (USD1.3379)
EUR: firm at USD1.1792 (USD1.1781)

GOLD: down at USD1,257.74 per ounce (USD1,263.21)
OIL (Brent): soft at USD61.24 a barrel (USD61.63)

(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come

0830 GMT UK Halifax House Price Index

1100 CET EU GDP and Main Aggregates Estimate
1100 GMT Ireland Live Register
1000 CET Italy Labour Cost Index
0900 CET Spain Housing Price Index
0900 CET Switzerland SNB foreign currency reserves

0730 EST US Challenger Job-Cut Report
0830 EST US unemployment insurance weekly claims report - initial claims
0830 EST US weekly export sales report
0830 EST Canada building permits
0945 EST US Bloomberg Consumer Comfort Index
1000 EST US quarterly services
1000 EST Canada Ivey Purchasing Managers Index
1030 EST US EIA weekly Natural Gas Storage Report
1500 EST US foreign central bank holdings
1630 EST US consumer credit
1630 EST US Federal Discount Window borrowings
1630 EST US money stock measures
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US President Donald Trump's decision to recognize Jerusalem as the capital of Israel has triggered an outpouring of criticism from European and Arab leaders amid fears it could spark further violence in the region. Palestinian Authority President Mahmoud Abbas said Trump's Wednesday announcement, which overturns decades of US policy and will see the US embassy move from Tel Aviv to Jerusalem, was "reprehensible." It would undermine peace efforts and encourage Israel "to pursue the policy of occupation, settlement, apartheid and ethnic cleansing," Abbas said, adding that the US had "withdrawn" from its role in Israeli-Palestinian peace efforts. Eight members of the UN Security Council, including Britain and France, Egypt, Italy and Sweden called for an emergency meeting, now due to take place on Friday, on the US move. But Trump said the move was a "recognition of reality".
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Trump's decision on Jerusalem harms the prospect for Israeli-Palestinian peace, UK Prime Minister Theresa May said. "We disagree with the US decision to move its embassy to Jerusalem and recognize Jerusalem as the Israeli capital before a final status agreement. We believe it is unhelpful in terms of prospects for peace in the region," she said in a statement. "Our position on the status of Jerusalem is clear and long-standing: it should be determined in a negotiated settlement between the Israelis and the Palestinians, and Jerusalem should ultimately be the shared capital of the Israeli and Palestinian states."
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May spoke to her Irish counterpart, Leo Varadkar, and to the leader of Northern Ireland's Democratic Unionist Party on Wednesday following this week's collapse of a deal on the post-Brexit Irish border. May discussed the border issue by phone with Varadkar and DUP leader Arlene Foster, with DUP sources saying afterwards that there was "still work to be done" to reach agreement, The Belfast Telegraph reported. May's minority Conservative government is propped up by 10 DUP lawmakers on key votes in the British parliament. Answering questions in Parliament on Wednesday, May said the border issue would be finalized only when Brexit negotiations moved into the second phase.
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China's soaring levels of corporate, government and household debt are threatening the country's financial stability, the International Monetary Fund said in a report, urging the government to move away from credit-fuelled economic growth. China's credit-to-GDP ratio now stands at around 25%, which is "very high by international standards" and "consistent with a high probability of financial distress," the report said. Corporate debt has reached 165% of gross domestic product while household debt has also risen quickly over the past few years, the IMF said. The Chinese government is prioritizing "social stability" in the near-term, appearing "to rely on credit expansion to continue financing firms even when they are not viable," the report said.
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Germany's industrial production dropped unexpectedly in October, data from Destatis revealed. Industrial production fell 1.4% month-on-month in October, following a revised 0.9% drop in September. Production was forecast to rebound 0.9%.
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Germany's Social Democrats hold a conference opening Thursday to consider a call from the centre-left party's leadership to launch talks with Chancellor Angela Merkel so to end the nation's political gridlock following September's election. SPD leader Martin Schulz attempted on Wednesday to rally his party behind the talks with members torn between backing Merkel for a fourth term in power or going into opposition to regroup after suffering its worst result since 1949 at the September poll.
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Growing tensions between western and eastern Europe are high on the agenda as dozens of foreign ministers gather Thursday in Vienna for the annual meeting of the Organization for Security and Co-operation in Europe. The Russian and US chief diplomats, Sergei Lavrov and Rex Tillerson, are planning to meet face-to-face to discuss the Ukraine crisis, which has damaged relations between Moscow and Western countries.
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BROKER RATING CHANGES
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UBS RAISES CENTRICA TO 'BUY' ('NEUTRAL') - TARGET 165 (215) PENCE
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JPMORGAN RAISES STAGECOACH TO 'NEUTRAL' ('UNDERWEIGHT') - TARGET 174 (131) PENCE
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BARCLAYS RAISES AVEVA TO 'OVERWEIGHT' (EQUAL WEIGHT) - TARGET 2900 (1750) PENCE
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Liberum Cuts Hansteen To Hold from Buy, Price Target Up To 140p From 135p
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CREDIT SUISSE CUTS VIRGIN MONEY TO 'NEUTRAL' (OUTPERFORM) - TARGET 305 (330) PENCE
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COMPANIES - FTSE 100
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Coca-Cola HBC said it has appointed Zoran Bogdanovic as chief executive officer with immediate effect. He will be succeeding Dimitris Lois who held the role for six years, but died in October during a leave of absence to undergo treatment for a medical condition. Bogdanovic has been a part of Coca-Cola HBC for nearly twenty years since 1998, his most recent role being regional director, taking responsibility for 12 countries situated in the Balkans and Africa for nearly five years since 2013.
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Legal & General said it has experienced "particularly strong growth" in recent weeks, and remains well-placed to deliver strong growth in its core markets. Legal & General Retirement has delivered total sales for 2017 to date of GBP6.2 billion, with the business showing strong momentum in the UK and US institutional pension risk transfer markets, as well as in individual annuities and lifetime mortgages. Legal & General Investment Management achieved total external net inflows of GBP38.1 billion to the end of October. "L&G is on track for a record year for earnings and profits. Our core business divisions are generating formidable momentum. With yesterday's announcement of the sale of our closed book, in run-off Mature Savings business for GBP650 million, our business is now well-positioned," said Chief Executive Nigel Wilson.
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The under-fire chairman of the London Stock Exchange Group has received a welcome boost from an influential voting advisor 13 days ahead of a shareholder meeting that will decide his future, Sky News reported. Sky News said it has obtained a copy of a report by Institutional Shareholder Services which recommends that investors in the LSE's owner oppose a resolution aimed at ousting Donald Brydon from the board. ISS's endorsement of Brydon could prove an important factor in securing his tenure until his planned exit in 2019, Sky News noted, even as The Children's Investment Fund Management continues to agitate for his immediate departure.
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Italy's antitrust agency has fined Unilever's Italian arm for abusing its dominant position in the country's ice cream market, Reuters reported. The agency said on Wednesday it is to fine the Italian segment more than EUR60.0 million for abusing its position in single-wrapped, so-called "impulse" ice-creams intended for immediate consumption, which are sold through its Algida brand. Reuters said Unilever's Italian unit has rejected the agency's decision and will appeal.
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Insurer Prudential is looking to sell up to GBP13 billion of its GBP33 billion UK annuity business, Sky News reported. The company has asked potential bidders to table offers for one or more portfolios from its legacy book by December 22, Sky News reported, citing sources.
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COMPANIES - FTSE 250
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DS Smith - which will begin trading in the FTSE 100 effective December 18 following the latest index review - reported an increase in interim revenue but a slight fall in profit, due to acquisition and fibre costs. Revenue rose to GBP2.80 billion from GBP2.36 billion in the six months to October 31, but pretax profit fell to GBP144 million from GBP146 million. Input costs were substantially higher period-on-period, DS Smith said, reflecting a rise in fibre costs and in paper pricing. The corrugated packaging firm also said it was hit by higher amortisation and adjusting items related to acquisitions in the period. "The outlook remains positive as we begin our second half with good momentum. Our packaging proposition that delivers real value to our customers is reflected in our volume growth and, while input cost pressures remain, we continue to recover those costs as planned," said DS Smith.
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COMPANIES - INTERNATIONAL
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Walt Disney Chief Executive Robert Iger will likely stay on past his 2019 retirement date if the entertainment company wins its bid to buy the entertainment assets of Twenty-First Century Fox, the Wall Street Journal reported citing people familiar with the negotiations. Representatives of 21st Century Fox and its executive chairman, Rupert Murdoch, requested that as part of the potential sale that Iger stay on past his planned July 2019 retirement to assist with the integration of assets, valued today at USD40 billion, and strategic repositioning of the combined businesses, according to the newspaper, which is owned by Murdoch's News Corp.
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Citigroup Chief Financial Officer John Gerspach said that the bank expects to take a non-cash charge to earnings of about USD20 billion if the US Senate's version of the tax reform bill is enacted. Gerspach said at an investor conference in New York that the hit to profit would mostly stem from the bank writing down its deferred tax assets in the period the bill is signed. About USD3 billion to USD4 billion of the charge would come from the taxation of unremitted foreign earnings. "From what we understand in that tax bill, our best estimate would be in the year that bill gets signed we would probably have an upfront hit of USD20 billion," Gerspach said.
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The former general manager of Volkswagen's US Environment and Engineering Office has been sentenced to seven years in prison and a USD400,000 fine, after admitting he helped the firm evade clean-air laws. Oliver Schmidt, 48, a citizen and resident of Germany, pleaded guilty on August 4 to one count of conspiracy to defraud the US, to commit wire fraud and to violate the Clean Air Act, and to one count of violating the Clean Air Act. In connection with his guilty plea, Schmidt admitted that he agreed with VW employees to mislead and defraud the US and domestic customers who purchased diesel vehicles, and to violate the Clean Air Act.
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Thursday's Shareholder Meetings

MJ Gleeson
Fidelity Asian Values
Investment Co
Edgon Resources
Henderson International Income Trust
Hemogenyx Pharmaceuticals
Sanditon Investment Trust
Aeorema Communications
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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2017 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Hansteen Holdings PLC 130.50 GBX -0.46 -
Ladbrokes Coral Group PLC 172.10 GBX -0.41 -
Virgin Money Holdings (UK) PLC 275.20 GBX 0.73 -
AVEVA Group PLC 2,702.00 GBX -0.44 -
GVC Holdings PLC 922.00 GBX -0.75 -
Stagecoach Group PLC 170.59 GBX 0.05 -
Centrica PLC 143.40 GBX -0.97
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