GVC to Bypass the £700m Ladbrokes Payout after FOBT Stake Cut?

GVC Holdings appears to be plotting to avoid paying out the sum of ca. £700m to former investors in Ladbrokes Coral after the UK decided to bring forward max FOBT stake cut to April, following a long and painful debate.

The change means that GVC may avoid the payment related to Contingent Value Rights (CVRs) - part of its March acquisition of Ladbrokes Coral. Under the terms of the deal, GVC was to pay around £700m to former Ladbrokes shareholders if the maximum FOBT stake legislation was not passed before March 28th, 2019.

The Wednesday-officiated decision will have been incorporated by a Statutory Instrument in Parliament by the end of the week, reads Culture Secretary Jeremy Wright’s statement released Wednesday. The cut wasn’t mentioned in the Finance Bill, which details the government's spending and tax plans for 2019, but it was referenced by Chancellor Philip Hammond in his October Budget speech.

As things stand now, GVC is likely to save some £600m due to the new legislation.

Explains an undisclosed analyst from Berenberg Bank:

“With this risk dispelled, and with certainty on the regulatory outcome in the UK, we think many negative catalysts are out of the way.”

The GVC- Ladbrokes Deal

Back in March, GVC completed Ladbrokes takeover in a deal estimated at ca £4bn. The company acquired some 271,816,558 of Ladbrokes’ ordinary shares, worth €0.01 each.

The deal was arranged in December 2017. Ladbrokes Coral shareholders were agreed to receive 32.7p per share and 0.141 new GVC shares, with a further contingent entitlement of up to 42.8p, depending on the FOBT stake ruling.

At the time, GVC chief executive Kenneth Alexander said that “the creation of one of the world's largest listed sports betting companies, combining a portfolio of established brands, proven technology and leading market positions in multiple geographies, is a truly exciting prospect.”

“In a dynamically evolving industry, the transaction creates an enlarged group with the scale, diversity, proprietary technology and management expertise to pursue many opportunities globally”, Alexander concluded.

The opportunities seem to have expanded with the latest goings-on…. not that GVC hasn’t made a name for itself over the years.

GVC is a multinational sports betting and gaming group and a constituent member of the FTSE 100. It has expanded rapidly in recent years to become one of the world’s largest listed sports betting and gaming businesses. The Group owns a number of leading brands, including bwin, Coral, Sportingbet, and now Ladbrokes.

New Legislation to Be Enforced in April

Originally, the UK Government planned to introduce a new 21% remote gambling duty tax in April and wait with the implementation of the FOBT stake cut until 2020. And whilst the first was cited as a compensation measure for the projected FOBT losses, the decision to postpone the latter brought forth fierce opposition, culminating with the UK Minister of Sport Tracey Crouch’s resignation.

Crouch went on to join the FOBT rebellion, which, as it turned out, paid off on Wednesday.

On top of the 21% rate hike, the new measure will also see offshore companies offering online casino games be taxed additional 6%.

Source:

“GVC to Avoid £700m Ladbrokes Payout after FOBT Stake Cut”, igamingbusiness.com, November 15, 2018.