GVC Holdings (GVC) is fuelling rumours of consolidation in the gambling industry just days after the government announced its intention to cut the maximum stakes allowed on fixed-odds betting terminals. The online gaming group has sold its Turkish business Headlong Limited for a maximum amount of €150m (£133m), contingent on performance over the next five years. It's conceivable that proceeds could be used to make another tilt at an industry peer in the gaming market.
Management said the decision to sell the Turkish division was part of its aim to focus on regulated markets, make the company more attractive to investors, and to increase its appeal to potential consolidation partners. GVC has held talks with Ladbrokes Coral (LCL) twice over the past 12 months about a potential tie-up worth up to around £3.6bn. News of the sale of the Turkish business to help with M&A activity sent Ladbrokes shares up around 5 per cent on the day.
Even if an acquisition does not come to fruition, GVC looks to be in better shape as a consequence of the disposal of Headlong. Analysts at Investec upgraded forecasts for full-year cash profits in 2018 by 1.2 per cent to €312m and total net revenue by 2.6 per cent to €1.02bn. The Turkish business generated €35m cash profits in 2016, but analysts think that selling the division will improve GVC’s quality of earnings, while the proceeds of the disposal provides further scope for M&A activity.
