GVC fixes the odds with Ladbrokes takeover proposal

A clever bookie always ensures the odds are in their favour. GVC has proven itself to be a very clever bookie with the way it has handled its latest approach to Ladbrokes Coral.

The industry is in the throes of merger mania, driven by increased taxes and regulation. Most analysts had, however, expected a period of calm in the run up to the Government’s decision on how much to cut the maximum stake punters can wager via oddsmakers' beloved fixed odds betting terminals (FOBTs).

Currently, it’s £100 but that could fall to as little as £2, depriving high street bookies of their favourite cash cow in the process.

GVC, the M&A banker’s best pal because it seems to get ants in its pants if it doesn’t do a deal every few months, has found a way around the uncertainty this has created when it comes to assessing Ladbrokes' future earnings prospects.

It proposes to pay an upfront £3.1bn in a mixture of cash and its hot as a scotch bonnet chilli shares (their fancy valuation is a good reason for it to strike now), with up to £800m more on the table dependent on the Government’s FOBT verdict.

That will disappear quicker than a bet gone bad if £2 is the favoured option, but it probably won’t be because that’s what Labour has been campaigning for. A cut to £50 would yield £800m, valuing the deal at £3.9bn. But that probably isn’t going to happen either.

The smart money on £20. At that level the deal would come out at around £3.66bn.

Kenneth Alexander, the CEO of GVC, and the driving force behind its deal mania, has thus doubly fixed the odds in his favour, landing his whale before anyone else can fire off a harpoon, while protecting himself (and his shareholders) should ministers bring the hammer down.

He gets the Ladbrokes, Coral and Gala brands, and a bunch of synergies, while Ladbrokes gets access to his tech (all important in today’s gambling industry) and international reach.

The consensus view is that it's a win win, with the only losers being the workers who are going to get canned when the cost cutting axe starts to fall.

At some point, Mr Alexander, whose success with M&A is really quite startling, is probably going to have to knuckle down and prove he can run a sustainable business and not just a deal engine. But there may still be more fish in the sea for his bankers to locate for him, so that won't happen for a while.

If he gets this through his creation will pose far more challenging questions for rivals such as Paddy Power Betfair, and especially William Hill, which has been showing signs of life, but always seems to be the bridesmaid in these situations.