Gaming consolidator GVC (GVC) plans (7 Dec) to buy Ladbrokes Coral (LCL) for up to £3.9bn.

GVC has a strong record of creating value from acquisitions, having bought Sportingbet in 2013 and Bwin.Party in 2016, although the FTSE 250 business took a dividend holiday in calendar 2016 under the conditions of the debt financing connected with the Bwin.Party deal.

If the Ladbrokes Coral acquisition proceeds, GVC will own 53.5% of the enlarged gambling group, whose CEO would be GVC boss Kenneth Alexander.

Berenberg says the high cash flow generation and quick deleveraging following the deal would support GVC’s progressive and generous dividend policy of at least 50% of free cash flow. For now Berenberg forecasts a €30 cent dividend from the Foxy Bingo-to-Sportingbet brands owner for 2017, rising to €32.84 for 2018.

Berenberg says the Ladbrokes Coral deal makes strategic sense for both companies and remains convinced ‘GVC is the best way to play trends in the gaming space’.

Irish broker Davy argues: ‘Enhanced scale would obviously improve the defensiveness of the group as the industry faces rising regulatory and tax hurdles. No detail on potential synergies has been provided but we would think that £70-£100m would be achievable over time through integration of technology.’ (JC)

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