On Tuesday, Desmond (pictured) launched an online presentation of his argument that “the recent history of value destruction” at the hands of Ladbrokes management and board of directors should give shareholders pause before voting their approval of the merger at the company’s general meeting on Nov. 24.
Desmond, who sold his Betdaq betting exchange to Ladbrokes in 2013 and who holds a 1% stake in the bookmaker, called the merger “a zero premium acquisition of Ladbrokes by Coral.” Desmond believes the deal is “effectively the death of Ladbrokes as an independent company.”
Desmond says the merger would deliver control of Lads to Coral’s private equity owners while also providing them with “significant relief” from their £2.2b debt burden. Desmond says Lads shareholders will face significant added risks, including increased exposure to a declining retail business, high debt and “unsubstantiated synergies.”
The merger’s stipulated £75m payout to Lads’ online technology provider Playtech also comes in for a kicking, with Desmond calling it a “very substantial and unexplained incentive payment” given the failure of Lads’ digital division to achieve the traction promised under the company’s 2013 deal with Playtech.
Desmond unfavorably contrasts Lads’ adjustment to the online betting boom with that of rival William Hill. Desmond says that an investor who bought Hills shares in 2010 has nearly doubled his or her investment while a similar investment in Lads has lost over 20% of its value.
Desmond notes that Lads has booked over £200m in exceptional writeoffs in the past three years, suggesting that “the recurring nature” of these writeoffs indicates that there’s nothing exceptional about them. Rather, they are “a recurring mechanism for dealing with recurring investment failures.”
Ladbrokes responded to Desmond’s missive with a statement noting his views didn’t come as a surprise as he has been in “extensive dialogue with the management team and not been afraid to talk of undertaking such action.”