Dermot Desmond launches scathing attack on Coral merger

Ladbrokes shareholder Dermot Desmond has launched a scathing attack on the firm’s board and senior management as he urged shareholders to reject the agreed merger with Gala Coral.

In a 58-slide presentation which began circulating online last night under the title ‘Say No to Coral’, Desmond outlined a number of reasons why Ladbrokes shareholders should reject the deal which was agreed in July and expected to complete early next year.

“The recent history of value destruction suggests shareholders can no longer rely on the Board which has presided over this decline or the management team which intends abdicating turnaround responsibility to its Coral counterparts to deliver the right solution to Ladbrokes,” said the report.

Desmond, who sold Betdaq to Ladbrokes for €30m in 2013, also argued that share price decline since the merger was announced makes the deal a “zero premium acquisition of Ladbrokes by Coral”.

And he urged shareholders to vote against the deal, insisting on a review of “all the strategic options open to Ladbrokes in a very active M&A market”.

Desmond also criticised the agreed £75m services settlement with Playtech, describing it as an “unexplained incentive payment despite the failure of Ladbrokes’ Digital Division to achieve the recovery which the 2013 Playtech marketing deal was intended to deliver”.

He said the merger would leave Ladbrokes shareholders with a diluted stake in a company exposed to additional risks including debt, unsubstantiated synergies and higher retail exposure.

And he raised questions over the competency of both the board and senior management, arguing that “the plain truth is that they have not performed”.

In a statement this morning, a Ladbrokes spokesperson told eGaming Review the firm remained “confident that shareholders see the attraction of the proposed deal”, adding that it continued to work towards its conclusion.

“We have had significant dealings with Mr Desmond as both a shareholder and a commercial partner over recent times,” the spokesperson said.

“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. As a shareholder he has a right to express his view and to vote accordingly at the EGM next week,” he added.

In a note this morning, Peel Hunt analyst Nick Batram said Desmond’s open letter to shareholders was “founded on some valid points”, but didn’t put forward much of an alternative plan.

Batram added that it could act as a catalyst to encourage others to join the fray and that a competitive situation should be “good news for shareholders”.

Peel Hunt retained its “Buy” rating on Ladbrokes, saying upside potential remained greater than downside.

Ladbrokes share price was up half a percent to 109.80p in early trading this morning.