The value of the CVR, which would be satisfied by the issue of loan notes by GVC, will be determined by the outcome of the UK's ongoing Triennial Review relating to the regulation of Category B2 fixed-odds betting terminals (FOBTs) and its estimated impact on the run-rate profitability of Ladbrokes Coral's United Kingdom business.
Based on a closing GVC price overnight of 911.5p and 135.65p for Ladbrokes, the offer would values Ladbrokes Coral at £3.1bn or 160.9p per share, with the CVR of up to 42.8p per share potentially taking the total value up to £3.9bn.
The possible offer for Ladbrokes Coral would include 32.7p per share in cash as well as 0.141 GVC shares for each Ladbrokes Coral share.
GVC, which owns the Bwin and Sportingbet brands, would hold 53.5 per cent of the combined group.
The review is part of a government crackdown on FOTBs after MPs raised concerns the machines were too addictive and fuelled problem gambling.
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The two companies believe that a combination could create material shareholder value.
It is the latest move in a wave of mergers and takeovers in the gaming and betting industry and comes just a year after Ladbrokes (Amsterdam: LB6.AS - news) and Gala Coral completed a tie-up to form Ladbrokes Coral.
The two groups said in a joint statement on Thursday they were in detailed talks over a deal that would give Ladbrokes shareholders around 46.5 percent of the combined group.
They added that the enlarged group would benefit from operating different brands across different markets including the UK, Italy and Australia. Current rules limit maximum stakes on these machines to £100, but this could be slashed to as low as £2. There could also be synergies from the deal, while the Board of GVC also believes that the transaction would be double digit EPS accretive from the first full year post-completion. Ladbrokes Coral, whose traditional betting shops in the U.K.'s town centers are fading, would get more exposure to the expanding digital gaming business, while GVC could reach more potential customers for its online platforms.
But he said that GVC's pricing hedge "makes sense", as did the strategic rationale for the deal. Turkey had presented a roadblock in GVC's quest to buy Ladbrokes Coral since it is an unregulated market and vulnerable to sudden clampdowns.