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|Ladbrokes slips after purchase aborted
to mount on chief executive Richard Glynn as bookmaker ends talks with online
gaming group Sportingbet
in Ladbrokes slipped close to an all-time low after the bookmaker aborted its
latest effort to patch up its struggling online business by abandoning
acquisition talks with Sportingbet.
News of the U-turn which
followed a similar conclusion to talks to acquire another online gaming group,
888, in April is likely to heap further pressure on Ladbrokes boss
Richard Glynn, who joined the group in April 2010 with a brief to beef up the
company's digital offering.
Ladbrokes shares edged down 0.9p in a
rising market to 119.7p, meaning they now trade at a 24% discount to when Glynn
joined the company and have underperformed both the FTSE 250 and archrival
William Hill during that period.
Glynn said: "No [I don't feel under
any pressure]. I'd feel under increasing pressure if I thought I'd done a deal
that was wrong. We're a very tight board. We've determined this every step of
the way. We have absolute unanimity on purpose and unanimity on the decision
that we've made."
He declined to
provide odds on the chances of him still being at the company at the end of
what he terms "plan A", a programme to revamp the company's internet operations
organically, scheduled for completion by the middle of next year.
Analyst Simon French at broker Panmure Gordon said: "In essence it
sounds like it's back to plan A, which is £50m of investment in the
[online] division over two years. I think it's concerning that they continue to
enter talks with companies and then don't seem to be able to close out the
deal. It begs questions about whether other companies will be willing to enter
acquisition talks with them in the future."
However, the rationale
behind the aborted deal to provide Ladbrokes with much improved online
betting technology as well as an international business remains and
market watchers identified Unibet as another potential target. Glynn declined
Ladbrokes had been in talks with Sportingbet since June,
but the target's business in Turkey, where unlicensed gambling websites are
illegal, was seen by analysts as a stumbling block to a successful takeover.
That issue appeared to have been resolved in July, however, when Sportingbet
announced it was discussing selling its Turkey-facing site for an estimated
£100m to AIM-listed GVC Holdings.
But Glynn said: "We have been
unable to agree a structure which delivers increased shareholder value within
an acceptable regulatory environment".
Glynn pulled out of talks with
888 in April because of long-running differences in what each side thought the
business was worth.
One gaming analyst, who declined to be named, said:
"I suspect that Glynn will now be under pressure. There was always an issue
[with the Sportingbet deal] that was obvious to everybody. They have now spent
months to conclude that the obvious block cannot be avoided. He is yet to
deliver anything online and Ladbrokes shares are at an all-time low."
When Glynn joined the company last year he was handed a package that
meant if Ladbrokes' share price doubled over the next five years to
£2.97, he would collect £12m in stock. While that punt is looking
increasingly unlikely to pay out, the downside for Glynn, who earns a salary of
£580,000 a year, is limited. He currently holds just 268 Ladbrokes shares
which are worth slightly more than £320.
Sportingbet said its
talks with GVC continue, but its shares still slumped by more than 19% to 37p.
Despite the market expecting a Ladbrokes bid at around 70p-80p,
Sportingbet shares never rose above 60p during the talks, indicating that few
investors believed that a deal was a certainty.
Simon Davies, of broker
Collins Stewart, said: "Sportingbet's share price reflected a low probability
of success, but this is undoubtedly disappointing. We now expect it to sell its
Turkish operations; bringing in around £80m over several years, and
reducing regulatory risk. It comes at a price with circa £28m
knocked off full-year 2012 ebitda [earnings before interest tax depreciation
and amortisation] and earnings per share diluted by around 50%. We think the
reduction in risk will drive a positive response, increasing the attractions
for other potential bidders, such as bwin.party or Betfair."