It has now been 18 months since Richard Glynn took the top job at Ladbrokes with a brief to drag the bookmaker into the 21st century, particularly by stepping up its online operations. One might take the view that he needs to sharpen his sense of urgency. After all, yesterday's decision to walk away from the acquisition of Sportingbet represents Mr Glynn's second failure in the space of six months to seal the deal on a major online expansion. Earlier this year, Ladbrokes also ended discussions with 888.
Still, the two deals foundered for quite different reasons. With Sportingbet, Mr Glynn has been unable to satisfy himself that an acquisition would not saddle Ladbrokes with unpleasant legacy regulatory issues. With 888, Ladbrokes was simply not prepared to pay the price it was being asked for.
Would Mr Glynn's critics question either decision? Only if they felt comfortable with a much more gung-ho approach to doing business. On Sportingbet, Ladbrokes has always made it clear it would not proceed unless it could get total reassurance about the regulatory position – and given the mess British bookmakers have found themselves in with online operations overseas in recent years, that seems eminently sensible. Similarly, overpaying for 888 would have been utterly counter-productive.
The problem for Ladbrokes is that these deals are not going to get any easier to pull off. In one sense, Mr Glynn's readiness to say no to 888's demands was a statement to the markets that he would not be pressured into doing a deal despite Ladbrokes' obvious need for one. On the other hand, the more time that goes by without the sort of step-change an acquisition would bring, the greater the pressure to do any deal at all will be.
Ladbrokes hopes organic growth will ease that dilemma. It is in the process of investing heavily in its online offer – some of which is already beginning to bear fruit – and has found other ways to enhance revenues, such as betterin-shop gaming machines. It may be that other M&A opportunities present themselves in the months and years ahead but, if not, at least there is a fallback position.
Is this the right strategy? Well, progress under Mr Glynn may not have been as swift as shareholders would have liked, but running a bookmaker is no different to managing any other business: calculated risks are fine, reckless gambles are not.
* Expect the supermarket industry market share figures, due for publication today, to attract more interest than usual. The trend we have seen so far this year, where the biggest grocers, Tesco, Sainsbury's, Asda and Morrison, have been losing out to the discountsupermarkets at the bottom end and Waitrose at the top, has seen an outbreak of hostilities in the sector over the past few weeks.
Sainsbury's is due to up the ante on Wednesday with the launch of its "Brand Match" scheme, under which it promises to automatically hand out vouchers to any shoppers who buy goods that they could have got more cheaply from Asda or Tesco.
One can see the thinking. Sainsbury's needs some sort of response to the "Big Price Drop" unveiled by Tesco a week or so ago. Its scheme is similar to one operated by Asda, which also offersrefunds to customers if they pay more for their shopping than they would have done at rival stores, though it goes further since Asda requires people to do the price checks for themselves.
Still, there are at least two potential flaws. First, is it a good idea to automatically and routinely notify your customers that your products are moreexpensive than those of your rivals? And second, Tesco, aggressive as ever, has already responded to a Sainsbury's trial of this scheme in Northern Ireland by accepting its rival's vouchers for spending in its own stores. An expensive gimmick no doubt, but one that rather spikes Sainsbury's guns.
The wider point about what is going on in the groceries sector just now is that while they might want shoppers to think otherwise, it falls short of a full-scale price war. None of the supermarkets wants such a war, for their margins are already wafer-thin.
Rather, this is a battle to maintain market share in an economic environment that is prompting shoppers to make more visits to supermarkets but to spend less overall. Today's figures will underline the challenge, with the discounters showing faster growth than anyone else. Even at Waitrose, this year's gains have come from its move into branded, everyday products and a discount scheme of its own, launched this week, may help it consolidate further.
* The good news in the eurozone is Nicolas Sarkozy and Angela Merkel appear now to recognise what everyone from the International Monetary Fund down has been saying for weeks: Europe's banks must be recapitalised in order to make them strong enough to cope with a Greek default on its debts (and possibly other defaults too). Less happily, there is no detail available on how that might happen – or what level of recapitalisation is required.
No wonder, for this an almost impossibly difficult discussion if one assumes that the estimates of banks such as Nomura, which puts the current capital shortfall at €200bn and is not the most pessimistic, are broadly accurate. For sums of this scale, even if the banks' shareholders are prepared to stump up some of that cash, the taxpayer will have to contribute too. It is not going to be much fun for European governments explaining that one.
The search, then, is on for a mechanism that might allow the politicians to save face. Or to put that another way, to bail out their banks without being seen doing so. Make no mistake, however, we are moving inexorably closer to the partial nationalisation of many more of Europe's leading banks.Reuse content