On Friday, the Competition and Markets Authority (CMA) gave provisional approval to the Lads-Coral merger, subject to the condition that the enlarged group sells off 350 to 400 betting shops. The number is well below the 1k shops that earlier reports had suggested were under the CMA’s axe.
Between them, the two companies currently operate over 4k shops, roughly 46% of the 8,819 shops the UK market boasted as of Sept. 30, 2015. The CMA says it identified 659 local areas where the proximity of Lads and Coral shops would have resulted in a “substantial loss of competition” if the shops remain under current ownership.
The CMA expressed concern that Lads-Coral’s retail dominance in these areas could lead to less favorable odds or lower betting limits for punters, and rejected suggestions that punters could avoid this fate by choosing to wager online. The CMA acknowledged that online betting was a growing market but said the evidence showed many retail punters remain wedded to patronizing their local shops.
The CMA has set a June 13 deadline for responses to its provisional findings. Rival bookie William Hill, which has voiced its opposition to the merger, will undoubtedly continue to make its angry voice heard. The CMA also extended the deadline for its final decision on the merger to August 19 but hopes to have a decision ready by the end of July.
Ladbrokes issued a statement welcoming the CMA’s announcement and saying its focus was now on finding a buyer for its problematic shops. Rival Betfred has previously expressed its interest, while Irish bookies Boylesports announced on Friday that the sale represented “a clear opportunity” to realize its “long-term ambition to develop a significant retail presence in the UK.”
Credit Suisse called the CMA’s report “a step in the right direction” for the two bookies. Having previously forecast a forced divestment of 600 shops that would lead to a £34m earnings hit, the analysts now say Lads-Coral faces “an incremental £9m headwind” from the selloff, assuming the companies “recoup an average of £200k” per disposed shop.
With the CMA hurdle apparently cleared, the official union of Ladbrokes and Gala Coral into Ladbrokes Coral Plc is expected to be completed sometime in September or October.