Why one Ladbrokes shareholder does not approve of planned merger with Gala Coral
Dermot Desmond wants his fellow Ladbrokes shareholders to not approve its recommended merger with Gala Coral.
Desmond, who reportedly owns an approximate 1% share in Ladbrokes, wrote in a letter to Ladbrokes shareholders that the company has been led “down the disastrous path to a deal that is effectively the death of Ladbrokes as an independent company”.
The operators announced the plans for the merger in July, and the deal is subject to the approval of existing Ladbrokes shareholders and clearance from the Competition and Markets Authority.
The “disastrous path” that Desmond referred to has in his opinion been orchestrated by chairman Peter Erskine, who is set to step down from the position he took over in 2009, and John Kelly, founder and former chief executive of the Gala Coral Group, who is now a senior non-executive director for Ladbrokes.
A copy of Desmond’s letter, in which he outlined his views on the deal and why shareholders should not approve it, was linked on the website www.saynotocoral.com.
Desmond, who is also the majority shareholder of reigning Scottish Premiership champions Celtic, wrote: “The real winners in this transaction are the Coral shareholders. Make no mistake – this is a zero premium acquisition of Ladbrokes by Coral. The Coral shareholders receive access to liquidity for their shares and significant relief from a £2.2bn debt burden.
“In contrast, the Ladbrokes shareholders have suffered a 66% reduction in their dividends and will be saddled with gearing multiples fifty percent higher than the current level.
“Shareholders should vote against it at the General Meeting on 24 November and insist that an independent committee of the board, with appropriate advice from an independent investment bank, review all the strategic options open to Ladbrokes.”
Desmond was the owner of betting exchange Betdaq, which was sold to Ladbrokes in 2013 for an initial consideration of €30m.
Saynotocoral.com lists further reasons why the deal should not go ahead, including the background of the people said to be promoting the deal and a claim that Ladbrokes has a history of value destruction.
A presentation on the website says that Ladbrokes CEO Jim Mullen, who took over from Richard Glynn in April, does not have a “justifiable track record” and that it is “extraordinary” that Mullen was only made aware of the possibility of acquiring Gala Coral on the day he was promoted to CEO.
Ladbrokes said in a statement: “We note his [Desmond’s] views and are not surprised by them as he has been in extensive dialogue with the management team and not been afraid to talk of undertaking such action. As a shareholder he has a right to express his view and to vote accordingly at the EGM next week.”
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