Third time’s a charm for GVC (GVC). After two failed attempts, Ladbrokes Coral's (LCL) shareholders have voted “overwhelmingly” in favour of a takeover. GVC chief executive Kenneth Alexander said both parties were keen for the deal to work out, particularly as the changing regulatory landscape makes an enlarged, more geographically diverse group more defensive.
The biggest question still hanging over the tie-up is the outcome of a review into maximum stakes wagered on fixed odds betting terminals (FOBTs) in the UK. GVC’s offer included a contingent value right (CVR), so the final amount paid for Ladbrokes will depend on the review outcome. In the case of a £50 limit, GVC would pay £3.9bn, but this would drop to £3.1bn for just £2 per spin.
The logic of the deal is underpinned by GVC’s sharper focus on regulated markets. The Turkish business was sold ahead of the third takeover offer, while a majority stake was taken in Crystalbet in Georgia. Mr Alexander called Crystalbet "fast-growing, with entrepreneurial management", but insisted it "wasn't a distraction” from the Ladbrokes deal.
With the deal in place, management can focus on the benefits the larger group could drive. Mr Alexander hopes to save £100m-worth of costs – and that doesn't include capital expenditure or working capital. GVC will also gain exposure to the sports betting market in the UK and the Australian market. The latter has suffered regulatory issues of its own, with a ban on credit betting and a point of consumption tax introduced in some Australian states. But Mr Alexander thinks Ladbrokes is better placed than rivals such as William Hill (WMH), which recently sold its Australian business..
Strip out the Ladbrokes deal, and GVC is already a good bet. Net gaming revenue improved 13 per cent to €1.01bn (£900m), while cash profit rose 40 per cent to €240m following a 5 percentage point rise in margins to 26 per cent.
Analysts at Peel Hunt expect pre-tax profit of €202m in 2018, giving EPS of 57.2¢, rising to €227m and 64.4¢ in 2019.
| GVC (GVC) | ||||
| ORD PRICE: | 930p | MARKET VALUE: | £2.83bn | |
| TOUCH: | 929.5-930p | 12-MONTH HIGH: | 996p | LOW: 685p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | na | |
| NET ASSET VALUE: | 422¢* | NET DEBT: | 8% | |
| Year to 31 Dec | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 170 | 13.0 | 22.5 | 45.8 |
| 2014 | 225 | 41.3 | 66.4 | 55.0 |
| 2015 | 248 | 25.5 | 40.0 | 56.0 |
| 2016 | 723 | -174 | -51.0 | 30.0 |
| 2017 | 896 | -25.6 | -13.0 | 34.0 |
| % change | +24 | - | - | +13 |
| Ex-div: | 22 Mar | |||
| Payment: | 3 May | |||
| *Includes intangible assets of €1.5bn, or 504¢ a share £1=€1.13 | ||||
