Ladbrokes Profits Boosted By Betting Machines – But Only ‘Just’
This year Ladbrokes has been seen to be in talks with both 888.com and Sportingbet plc, in an effort to boost their online business potential, and thereby, overall profits. Unfortunately both sets of talks have fallen through, and despite a 40% increase in online client sign-ups after a massive advertising push, the only real surge in revenue they have seen has been from betting machines. Ladbrokes retail suffered major losses during the UK August riots when they had to close 200 betting shops, and they have also been experiencing some un-favourable horse racing results.
Talks with online rival Sportingbet, shut down just this week, in a dispute over the fact that this brand was still offering online gambling services to countries where these products are not legal. The main concern was Turkey, and in recent news we hear that Sportingbet has managed to off-load their Turkish operations.
It is believed that the acquisition of Sportingbet would have substantially boosted Ladbrokes online business, but the deal fell through. The deal fell through with 888.com too, and we believe that the Turkish ops issue with Sportingbet was not the only problem. Certainly Ladbrokes must be looking for a bargain, but online gambling businesses don’t come cheap.
CEO of Ladbrokes – Richard Glynn denied that the failure of the Sportingbet deal had placed more pressure on the company, and said he did not consider it to be a failure. Ladbrokes is desperately trying to keep up with British rivals William Hill and others. Glynn recons that a bigger failure would have been concluding a deal which did not offer shareholder value! It is this statement that leads us to believe that they are seeking out something cheap. While a financial analyst says that this firm will find it harder to compete in 2012, simply due to the fact that they have failed with these acquisitions.
In the meantime Sportingbet plc has inked a deal to sell Turkish online gambling operations to a GVC-backed group, in three year earn-out. They were disposing of the property for at least €143 million in cash. It is a necessary evil for them to exit unregulated territories if they are to continue seeking out mergers with large public companies. Stock Exchange listed companies are answerable to shareholders and company law, are therefore not able to do business with firms which operate below the radar. This in effect also shows us that more and more online gambling concerns are becoming not only larger, but also more corporately inclined. This is the direction any industry takes once it becomes mainstream.
The disposal of the Turkish betting business will see this company earning the majority of its income from regulated territories. However it is still not a squeaky clean business, but they will use the income from the sale for fill in acquisitions and to grow their business within regulated markets. They believe they have shown their strategic intent, so, lets wait to see what transpires.
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