Statement regarding potential acquisition of Ladbrokes Coral Group plc
("Ladbrokes Coral") by GVC Holdings PLC ("GVC")
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION
THIS ANNOUNCEMENT IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON TAKEOVERS AND MERGERS AND THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
The board of Ladbrokes Coral and the board of GVC (the "Boards") announce that they are in detailed discussions regarding the possible combination of the two businesses, following the receipt by Ladbrokes Coral of a non-binding proposal from GVC regarding a possible offer for the entire issued and to be issued share capital of Ladbrokes Coral (the "Possible Offer").
It is expected that the Possible Offer would be structured as a scheme of arrangement pursuant to which GVC would acquire the entire issued and to be issued ordinary share capital of Ladbrokes Coral. Under the terms of the Possible Offer, Ladbrokes Coral shareholders would be entitled to 32.7p in cash and 0.141 ordinary GVC shares for each Ladbrokes Coral share, and a potential further value of up to 42.8p structured as a contingent value right ("CVR"). The value of the CVR, which would be satisfied by the issue of loan notes by GVC (the "Loan Notes"), would be determined by reference to the outcome of the Department of Digital, Culture, Media and Sport's current 'Review of Gaming Machines and Social Responsibility Measures' (the "Triennial Review") relating to the regulation of Category B2 Fixed-Odds Betting Terminals ("FOBTs") and its estimated impact on the run-rate profitability of Ladbrokes Coral's UK business, after giving effect to any mitigations. A summary of the proposed CVR mechanism is set out in Appendix I.
Based on the respective Ladbrokes Coral and GVC share prices as at the close of business on 6 December 2017, the Possible Offer values Ladbrokes Coral at 160.9p per Ladbrokes Coral share, equating to a total equity value of c.£3.1 billion, plus a CVR of up to 42.8p per Ladbrokes Coral share, equating to a total equity value of up to c.£3.9 billion (including the maximum CVR). It is expected that the Proposed Offer would include a mix and match facility allowing Ladbrokes Coral shareholders the opportunity to elect to receive more cash or more new ordinary shares in GVC, subject to offsetting elections made by other Ladbrokes Coral shareholders, as the case may be. The CVR would not be included in the mix and match facility.
Based on the terms laid out above, the parties anticipate that Ladbrokes Coral shareholders would hold c.46.5 per cent, and GVC shareholders would hold c.53.5 per cent of the issued and to be issued share capital of the enlarged group.
Whilst the determination of the senior management positions will be finalised by the parties over the coming weeks, it has been agreed by the parties that Kenneth Alexander would be the CEO of the enlarged group should the transaction proceed to completion.
The Boards believe that a transaction has the potential to create material shareholder value and that there is a compelling strategic rationale for the Possible Offer. The enlarged group would be an online-led globally positioned betting and gaming business that would benefit from a multi-brand, multi-channel strategy applied across some of the strongest brands in the sector. The enlarged group would be geographically diversified with a large portfolio of businesses across both regulated and developing markets, with the scale and resources to address the dynamics of a rapidly changing global industry. Any transaction would also enhance the enlarged group's position in a number of the world's largest regulated online gaming markets, including the UK, Italy and Australia, and would significantly increase GVC's current share of revenues from locally regulated/taxed markets to more than 90 per cent. The enlarged group would have strong growth prospects with momentum in its online businesses, potential for material synergies including the use of leading proprietary technology, and the opportunity to select the best of both people and operations.
The Board of GVC expects that the Possible Offer would result in material synergies which will create value for both sets of shareholders, which the Board of GVC would quantify in any announcement of a firm intention to make an offer for Ladbrokes Coral under Rule 2.7 of the City Code on Takeovers and Mergers (the "Code").
The Board of GVC also believes that the transaction will be double digit EPS accretive from the first full year post-completion and following all reasonably expected outcomes of the Triennial Review, including the FOBT maximum stake being set at £2.001. The Board of GVC believes that the enlarged group leverage will not exceed 3.0x Net Debt/EBITDA (where Net Debt is interest bearing loans and borrowings and customer liabilities, less cash and cash equivalents, and EBITDA is 'clean EBITDA'2) by the end of the first full financial year post-completion, following all reasonably expected outcomes of the Triennial Review.
A formal announcement of an offer under Rule 2.7 of the Code remains conditional on, inter alia, agreement on the other terms and conditions of the Possible Offer, satisfactory completion of customary due diligence and final approval by the Boards. The parties reserve the right to waive any or all of these pre-conditions.
GVC reserves the right with the agreement or recommendation of the Board of Ladbrokes Coral to a) vary the form and/or mix of consideration and/or b) make an offer at any time on less favourable terms. The parties reserve the right to adjust the terms of the Possible Offer to take account of the value of any dividend or other distribution which is announced, declared, made or paid by either party after the date of this announcement to the extent that such dividends are outside the ordinary course of business of, or inconsistent with the stated dividend policy of, Ladbrokes Coral or GVC, as the case may be.
This announcement does not amount to a firm intention to make an offer under Rule 2.7 of the Code and accordingly there can be no certainty that any transaction will occur, even if the pre-conditions are satisfied or waived. Any transaction would be subject to any requisite regulatory approvals, GVC shareholder approval and Ladbrokes Coral shareholders' acceptance or approval, as well as other customary conditions.
In accordance with Rule 2.6(a) of the Code, GVC is required, by not later than 5.00 pm (London time) on 4 January 2018, either to announce a firm intention to make an offer for Ladbrokes Coral in accordance with Rule 2.7 of the Code or to announce that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel on Takeovers and Mergers in accordance with Rule 2.6(c) of the Code.
Ladbrokes Coral and/or GVC will make a further announcement in due course.
This announcement has been made with the consent of Ladbrokes Coral and GVC.
1 Adjusted EPS is calculated on a clean basis, after net synergies and impact of the Triennial Review, and before transaction costs and one-time restructuring charges. This statement is not intended as a profit forecast or estimate for any period and should not be interpreted to mean that earnings per share for GVC or Ladbrokes Coral, as appropriate, for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for GVC or Ladbrokes Coral, as appropriate.
2 Clean EBITDA is earnings before interest, taxation, depreciation, amortisation, impairment charges, changes in the fair value of derivative financial instruments, share option charges and exceptional items after accounting for net synergies from the transaction and the impact of the Triennial Review, and before transaction costs and one-time restructuring charges.
Investor Call Details
GVC will host a conference call for analysts on 7 December 2017 at 8.00 am (London time). Participants may join the call by dialling one of the following numbers, approximately 10 minutes before the start of the call. A copy of GVC's presentation will be available at 8.00 am (London time) today on http://www.gvc-plc.com/html/investor/takeover_code_ladbrokescoral.asp
UK Toll-free Dial In: 08082370040
International Dial In Numbers: http://events.arkadin.com/ev/docs/FEL_Events_International_Access_List.pdf
Participant PIN Code: 73860820#
Kenneth Alexander, Chief Executive Officer
|+44 (0) 1624 652 559|
|Paul Miles, Chief Financial Officer||+44 (0) 20 3938 0079|
|Nick Batram, Head of Investor Relations & Corporate Strategy||+44 (0) 20 3938 0066|
|Houlihan Lokey (Financial Adviser to GVC)||+44 (0) 20 7839 3355|
|Investec (Corporate Broker to GVC)||+44 (0) 20 7597 5970|
|Buchanan (PR Adviser to GVC)||+44 (0) 20 7466 5000|
|Ladbrokes Coral Group||+44 (0) 20 8429 7776|
|Jim Mullen, Chief Executive Officer|
|Paul Bowtell, Chief Financial Officer|
|Donal McCabe, Group Communications Director|
|Paul Tymms, Director of Investor Relations|
|Greenhill (Financial Adviser to Ladbrokes Coral)||+44 (0) 20 7198 7400|
|UBS (Financial Adviser and Corporate Broker to Ladbrokes Coral)||+44 (0) 20 7568 1000|
|Tulchan (PR Adviser to Ladbrokes Coral)||+44 (0) 207 353 4200|
Greenhill & Co. International LLP ("Greenhill") is authorised and regulated by the Financial Conduct Authority in the UK. Greenhill is acting as financial adviser to Ladbrokes Coral and for no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Ladbrokes Coral for providing the protections afforded to clients of Greenhill, nor for providing advice in relation to the matters set out in this announcement.
UBS Limited ("UBS") is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK. UBS is acting as financial adviser to Ladbrokes Coral and no one else for the purpose of the consideration of a possible acquisition by GVC and will not be responsible to anyone other than Ladbrokes Coral for providing the protections offered to clients of UBS nor for providing advice in relation to this announcement or any transaction, arrangement or other matter referred to herein.
Houlihan Lokey EMEA, LLP ("Houlihan Lokey") and Investec Bank plc ("Investec"), which are each authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, are acting for GVC and no one else in connection with the matters set out in this announcement. In connection with such matters, Houlihan Lokey and Investec, their respective affiliates and their respective directors, officers, employees and agents will not regard any person other than GVC as their client, nor will they be responsible to anyone other than GVC for providing the protections afforded to their clients or for providing advice in relation to the contents of this announcement or any other matter referred to in this announcement.
Disclosure requirements of the Takeover Code
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0) 20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.
In accordance with Rule 2.9 of the Code, Ladbrokes Coral confirms that, as at the date of this announcement, it has in issue 1,915,930,034 ordinary shares of 28 1/3p each (excluding ordinary shares held in treasury). The International Securities Identification Number (ISIN) for Ladbrokes Coral's ordinary shares is GB00B0ZSH635.
In accordance with Rule 2.9 of the Code, GVC confirms that, as at the date of this announcement, it has in issue 303,561,921 ordinary shares of 0.01 euros each. GVC does not hold any ordinary shares in treasury. The International Securities Identification Number (ISIN) for GVC's ordinary shares is IM00B5VQMV65.
Publication on a website
In accordance with Rule 26.1 of the Code, a copy of this announcement will be available on GVC's website at http://www.gvc-plc.com/html/investor/welcome.asp and at Ladbrokes Coral's website at https://www.ladbrokescoralplc.com/investors by no later than 12 noon on 8 December 2017, but will not be available to persons in the United States, Australia, Canada, Japan or any other jurisdictions where publication of this announcement would violate the laws of such jurisdiction. The contents of the websites referred to in this announcement are not incorporated into and do not form part of this announcement.
Additional restrictions regarding the United States and other overseas jurisdictions
This announcement does not constitute the extension of an offer to acquire, purchase, subscribe for, sell or exchange (or the solicitation of an offer to acquire, purchase, subscribe for, sell or exchange), any securities or the solicitation of any vote in favour or approval of the Possible Offer in any jurisdiction, including the United States, Australia, Canada, Japan or any other jurisdiction where to do so would constitute a violation of the laws of such jurisdiction and any such offer (or solicitation) may not be extended in any such jurisdiction. Any securities to be offered have not been and will not be registered under the US Securities Act of 1933, as amended, or with any securities regulatory authority of any state of the United States and may not be offered or sold in the United States absent registration or an applicable exemption from registration thereunder. There may be no public offering of securities in the United States.
This announcement has been prepared in accordance with English law, the UK Listing Rules and the Code and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.
The release, publication or distribution of this announcement in whole or in part, directly or indirectly, in, into or from certain jurisdictions, including in particular the United States, Australia, Canada and Japan, may be restricted by law and therefore persons in such jurisdictions should inform themselves about and observe such restrictions.
SUMMARY OF PROPOSED CVR MECHANISM
Pursuant to the terms of the Possible Offer, it is expected that each Ladbrokes Coral shareholder would be issued with one CVR for each Ladbrokes Coral share that they hold at completion of the transaction.
The Triennial Review may propose changes to, amongst other things:
- maximum stake: the maximum stake which may be wagered by a player in a particular game played on a FOBT, which is currently set at £50, or £100 if certain identification, supervision and proceeds conditions set out in the relevant regulations are met;
- maximum number: the maximum number of FOBTs which is permitted in each Licensed Betting Office ("LBO"), which is currently set at four FOBTs per LBO; and/or
- spin speeds: the minimum period of time for a particular game cycle on a FOBT to complete (commonly known as "spin speed"), which is currently set at 20 seconds for Category B2 content only,
and for these purposes, potential changes to the maximum stake, to the maximum number of FOBTs in each LBO and to spin speeds are referred to as "Possible Triennial Measures".
Following the date of an affirmative vote in Parliament or other appropriate enactment procedure (the "Commencement Date") introducing legislation or regulation to implement Possible Triennial Measures relating to maximum stakes, each CVR would be exchanged for a Loan Note with the principal amount determined according to the estimated EBITDA impact of the Possible Triennial Measures on Ladbrokes Coral's UK business (the "Estimated EBITDA Impact").
No outcomes of the Triennial Review other than the Possible Triennial Measures would be taken account of in determining the value of the CVR.
The CVR and any related Loan Notes are expected to qualify for roll-over relief under UK tax law, as well as being transferable. The Loan Notes would be unsecured and would attract a market-based interest rate.
Noting the initial findings of the Triennial Review and request for industry consultation, the Boards of Ladbrokes Coral and GVC believe that if Possible Triennial Measures are enacted, they are most likely to relate to maximum stakes.
The table below sets out the value of each CVR based on various different levels of maximum stake as prescribed by any Possible Triennial Measures and has been agreed between Ladbrokes Coral and GVC. This table assumes that no Possible Triennial Measures are enacted other than in relation to maximum stakes.
|Maximum Stake (hard cap)||£2||£5||£10||£20||£30||£40||£50|
|Value per CVR||0.0p||13.4p||13.4p||30.3p||40.4p||40.5p||42.8p|
To the extent that any enacted Possible Triennial Measures provide for maximum stakes which are between any of the figures set out in the table above, the value of the CVR per Ladbrokes Coral share would be determined by linearly interpolating the relevant numbers.
If the Possible Triennial Measures do not relate solely to maximum stakes, or cannot be linearly interpolated between the figures set out in the above table, the Estimated EBITDA Impact and, consequently, the value of the CVR per Ladbrokes Coral share, would be determined through an agreed determination process involving representatives of Ladbrokes Coral, GVC and an independent expert.
The value of the Loan Notes to be issued pursuant to the terms of the CVR would be positively adjusted for the time value of money, depending on how many days after completion of the Possible Offer the Commencement Date occurred (a "Time-Value Adjustment").
If the Commencement Date has not occurred by the 365th calendar day after completion of any firm offer announced on the terms of this Possible Offer, then the principal value of each Loan Note to be issued pursuant to the terms of the CVR would be fixed at 35p (with no further adjustment).
Any actual payments under the CVR mechanism described in this Appendix I would depend entirely upon the outcome of the Triennial Review and would be capped at a maximum level equal to 42.8p per Ladbrokes Coral share plus any Time-Value Adjustment and interest on the Loan Notes. There could be no payment under the CVR mechanism.