Ladbrokes abandons pursuit of 888
Ladbrokes has ditched months of takeover talks with online rival 888 Holdings, claiming a deal was not in the best interests of its shareholders.
Bookmaker warning: Economic climate remains challenging
The bookmaker admitted discussions were taking place in December amid speculation it could stump up a £240m offer - but it is believed negotiations foundered over the price.
Shares in 888 tumbled 10% or 4p to 37.5p following the news, but Ladbrokes' stock bounced 5.3p to 140.2p.
888 chief executive Gigi Levy announced on Sunday that he is to step down despite announcing record first quarter revenues of £45.8m last week.
Ladbrokes chief executive Richard Glynn told Reuters: 'It's very amicable between us but, at the end of the day, I simply decided that it wasn't in the shareholders' interest. I took the decision that it didn't deliver value for the shareholders.'
The company will continue to look at opportunities for takeovers but Glynn said he was under no pressure to strike any deals and was focused on growing the company organically.
The announcement came as Ladbrokes revealed a 2.3% increase in first-quarter net revenues, excluding high rollers who place large-stake bets.
The figure was even stronger at 4.2% in the second half of the period following 'some great football results'. These offset a poor performance at the Cheltenham Festival last month, when net revenues were down £10.7m on the previous year as more favourites came in.
Online revenues were up 1.2% as strong growth in casino and bingo was offset by a 33% decline in income from poker. Bets through mobile phone applications grew 250%, with 18% of digital customers placing at least one bet through this channel.
In the UK, where the group has 2,100 outlets, net revenues increased 6.4% in the quarter. The group is introducing new gambling slot machines into all of its UK outlets and the roll-out is expected to complete ahead of schedule in May.
Glynn commented: 'Our drive to make Ladbrokes favourite again has good momentum.'
But he was cautious about the future outlook, saying: 'We expect the economic climate in the UK to remain challenging in 2011 with consumer confidence and disposable incomes continuing to suffer.'
Ladbrokes also announced today that it had poached Ian Bull from Greene King to become its new chief financial officer. Bull has worked at the brewer and pub firm since 2006.
View from the City
Paul Leyland, an analyst at asset manager Investec Securities, said: 'We believe walking way from 888 was the right thing to do in terms of price, regulatory risk and operational fit. However, Ladbrokes' lacklustre online performance demonstrates the scale of the job.'
Espirito Santo finance group analyst Geetanjali Sharma told Reuters that Ladbrokes' decision to walk away was welcome.
'The company has done the right thing by moving on from 888. It will however, need to clarify its strategy on the online segment if it is to remain relevant in the current industry environment,' she said.
James Hollins, analyst at broker Evolution Securities, commented: 'Overall, on trading, we think this is a strong first-quarter performance, with NGR [net gross receipts] trends improving, despite the difficult Cheltenham, and cost controls driving a 20% underlying improvement in group first-quarter operating profit.'
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