Dermot Desmond blasts £2bn Coral merger as the ‘death of Ladbrokes’

Mr Desmond said lost profits from up to 1,000 betting shops the merged company could be forced to sell off by competition authorities could outweigh £65m in cost savings

Ladbrokes can recover from bad years (PA Wire)

The Irish billionaire and Ladbrokes’ shareholder Dermot Desmond launched a blistering attack on the bookmaker’s planned £2bn merger with rival Coral, warning that it was “the wrong deal” for the business.

Mr Desmond – worth an estimated €1.5bn (£1.05bn) – is known as Ireland’s answer to Warren Buffett, having built up his fortune in a career spanning nearly 40 years. He co-owns the Sandy Lane Hotel in Barbados with fellow Irish tycoons JP McManus and John Magnier, and is the largest shareholder in Celtic, the Glasgow football club.

He has been a investor in the boomaker for nine years, holding a stake of about 1 per cent. But in an open letter to fellow shareholders, he said the deal was “effectively the death of Ladbrokes” as an independent company.

He attacked John Kelly – who would 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 added.

Mr Desmond said lost profits from up to 1,000 betting shops the merged company could be forced to sell off by competition authorities could outweigh £65m in cost savings. Higher betting-machine takings were vulnerable to regulation and a £75m settlement of Ladbrokes’ software deal with the Israeli specialist Playtech was expensive, he said.

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

Ladbrokes gets 51.75 per cent of the shares under the merger but its shares have suffered since July, taking the combined group’s market value down from £2.3bn to £2.1bn. The shares, which were 130p when the deal was announced, closed at 109.5p, an increase of 0.2p.

Mr Desmond, who sold his betting exchange business Betdaq to Ladbrokes two years ago, wants the deal to be reviewed by an independent investment bank.

Karl Burns, an analyst at Panmure Gordon, 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.”

Ladbrokes’ shareholders are due to vote on the proposed deal at an extraordinary general meeting next Tuesday.