Move quickly for Ladbrokes in buoyant market, suitors told

Move quickly for Ladbrokes in buoyant market, suitors told

Monday, June 8, 2015 Totally Gaming
Ladbrokes shares could continue to rise according to Peel Hunt

Paddy Power and other potential suitors have been advised to move quickly in acquiring Ladbrokes by the analyst whose ‘buy’ upgrade aided the UK gaming operator’s share price rise last week.

Ladbrokes shares jumped by almost four per cent last Thursday when Peel Hunt identified its digital marketing drive, support of new chief executive Jim Mullen and its new Playtech platform as reasons to back the company.

Now a Peel Hunt spokesman has told TotallyGaming.com that anyone interested in making a move on Ladbrokes, in a market that has been gripped by merger and acquisition fever over recent months, should not risk delay.

“There is no deal at the moment,” he told TotallyGaming.com. “However, what do I think the chances of Paddy Power bidding are? Well, if like me they believe some turnaround is likely they should move sooner rather than later.

“There are a number of reasons for the number acquisitions and mergers taking place at the moment. Regulatory costs are rising, cash flows a generally strong, technology is increasingly important, breaking into new markets is costly and challenging, while the gap between the outperformers and underperformers is quite substantial.”

With GVC, Amaya and 888 in talks to take over Bwin.party, Amaya’s purchase of PokerStars and Full Tilt and the huge outlays on International Game Technology and Bally by GTECH and Scientific Games, the gambling sector has been boisterous over the last 12 months. 

Paddy Power has long been suggested as a purchaser of Ladbrokes and rumours returned to the market last week, with the former seen as having a superior digital offering and the latter having stalled in recent years.

Mullen, who replaced Richard Glynn in March, will outline his business strategy on June 30, and Peel Hunt has suggested that £80m (€109.6m/$121.9m) of additional marketing spend on top of its base assumption over the next three years could drive Digital earnings before interest, tax, depreciation and amortisation some 60 per cent beyond its expected 2017 figures.

The Peel Hunt spokesman added: “The attraction of Ladbrokes to Paddy Power would be the opportunity to work its magic in Retail and Online and there would be some significant cost synergies. If you are a Ladbrokes shareholder it is a question of whether you feel holding out for the recovery will ultimately deliver more.”
 

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