Desmond attacks Ladbrokes-Coral merger

Irish billionaire and Ladbrokes shareholder Dermot Desmond has launched an attack on the bookmaker’s planned £2 billion merger with Coral, warning it was “the wrong deal” for the business.

Desmond, worth an estimated €1.5 billion, is known as Ireland’s answer to Warren Buffett, building up a huge fortune over a career spanning nearly 40 years. He has been a shareholder inLadbrokes for nine years, holding a stake of around 1% but said the deal was “effectively the death of Ladbrokes” as an independent company in an open letter to investors.

He attacked John Kelly, to be chairman of the combined business, for an “abject” performance as chairman of Gala Coral, and Ladbrokes chairman Peter Erskine for leading the bookmaker down a “disastrous path”.

“Ladbrokes’ shareholders should instruct the board to properly evaluate all strategic options open to it before committing to what I believe is the wrong deal,” he said.

Desmond said lost profits from up to 1000 betting shops the merged company could be forced to sell off by competition authorities could outweigh £65 million in cost savings. FOBT income is vulnerable to regulation and a £75 million settlement of Ladbrokes’ software deal with Israeli specialist Playtech was expensive, he added.

He said “The real winners are the Coral shareholders, who receive access to liquidity for their shares and significant relief from a £2.2 billion debt burden. Make no mistake this is a zero-premium acquisition of Ladbrokes by Coral.”

Ladbrokes gets 51.75% of the shares under the merger but its shares have suffered since July, taking the combined group’s market value down from £2.3 billion to £2.1 billion. Desmond wants the deal to be reviewed by an independent investment bank.

An analyst said “The problem is there are no other options at the moment for Ladbrokes. If it is left on its own it is in trouble as it does not have the cash to invest in the business and attract new customers.”

A Ladbrokes spokesman said: “We have had significant dealings with Mr Desmond as both a shareholder and a commercial partner over recent times.We note his views and are not surprised by them as he has been in extensive dialogue with the management team and not been afraid to talk of undertaking such action.”