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Ladbrokes/Coral merger leads to exciting opportunities on the High Street

07.04.2016 Gaming & Betting

Andrew Cotton

Andrew Cotton Associate and Director of Betting and Gaming

Following the merger between Betfair and Paddy Power, the second and third largest betting shop operators, Ladbrokes and Coral are now in the process of an attempted merger which would see the new merged entity overtake William Hill as the largest betting shop operator in Great Britain.

However, as with any such merger, the UK authority responsible for competition, the Competition Markets Authority (CMA) are investigating the proposed merger. Ladbrokes/Coral asked the CMA to fast-track the phase 1 investigation conceding the proposed merger would have competition issues. Now deep into phase 2 of the process, with the deadline for parties submissions passed, the statutory deadline for the CMA to make its final ruling is 24 June 2016, with a provisional decision being published later this month. Parties’ then have until late May to make their final submissions to the provisional decision.

In the text of the CMA’s decision to refer the merger for full investigation it concludes that there is a realistic prospect that the proposed merger will give rise to a substantial lessening of competition in areas where Ladbrokes and Coral compete closely and are insufficiently constrained by other betting offices.  The former Office of Fair Trading and former Monopolies and Mergers Committee have previously used powers to rectify anti-competitive effects of mergers in the past. One of the most recent gambling sector transactions where these powers were used was the acquisition of Gala Casinos by the Rank Group Plc in 2013.

The CMA has suggested in its conclusions to the phase 1 investigation that the method of counteracting this effect on competition would be to oblige the merged entity to divest itself of premises in those areas where there would be a substantial lessening of competition. This solution was also used in a merger involving Betfred’s acquisition of the Tote, where 25 stores were sold. However, given Ladbrokes/Coral’s market share of betting shops, the number of required sales in this instance would be far greater.

The CMA has adopted the same methodology as used by the OFT in the Betfred/Tote merger in order to identify local catchment areas, in which the merger gives rise to a substantial lessening of competition. The CMA has assessed the impact of the merger in relation to each of Ladbrokes and Coral’s betting offices by identifying each area in which:

  1. the Merger removes competition within a 400 metre radius of the Licensed Betting Office (“LBO”) (2:1 within 400m);
  2. the Merger removes competition within an 800 metre radius of the LBO (2:1 within 800m);
  3. the Merger reduces competition to two competing LBOs within a 400 metre radius of the LBO (3:2 within 400m);
  4. the Merger gives rise to a situation in which the geographically closest LBO belongs to the other merging party and there is no other competing LBO within a 200 metre radius (closest LBOs and no other LBO within 200m); or
  5. the Merger gives rise to a situation in which the geographically closest LBO belongs to the other merging party and there is only one other competing LBO within a 200 metre radius (closest LBOs and one other LBO within 200m).

The CMA have referenced the previous gambling investigations and, in particular, the Betfred/Tote merger where the phase 1 investigations have found that a reduction from three to two in a local area gives rise to competition concerns. Using this methodology thus far, the CMA have identified 798 stores which would need to be divested in order for this merger to take place.

Number of local catchment areas where overlaps identified
Coral LBO Ladbrokes LBO Total
Closest LBOs and one other LBO within 200m 66 61 127
Closest LBOs and no other LBO within 200m 124 126 250
3:2 within 400m 120 112 232
2:1 within 400m 48 44 92
2:1 within 800m 52 45 97
Total 410 388 798

The substantial number of sales required leads to prime property locations across the UK’s highstreets being made available to potential new betting shop operators, private equity firms and betting office operators not currently operating within the catchment areas identified.

We have been following this potential merger situation since it was first published by the CMA and are in the best position possible to advise any interested parties of the opportunities the divestment brings. Our specialist Betting & Gaming team, in tandem with our sizeable and rapidly expanding Real Estate team can assist with any potential strategy to take advantage of this exciting opportunity.

Please contact if you would like us to keep you up to date with the CMA investigation or to begin discussions with Ladbrokes/Coral.

Article authors:

Andrew Cotton