The traders who bet big on bookies’ mega merger

Was Labrokes ruling leaked?

TRADERS bet big on bookmaker Ladbrokes ahead of a crunch competition decision about its £2.2bn merger with rival Gala Coral.

Industry experts spotted a sudden surge in bets on Ladbrokes ahead of the announcement – gambles that will have paid off after shares spiked yesterday to close up 6.5pc or 7.8p to 127.3p.

The rise was due to an announcement from the Competition and Markets Authority outlining how the two chains should sell between 350 and 400 High Street shops to ensure they do not overwhelm competitors – but this was far less than the 1,000 that experts had previously feared might have to shut.

Ladbrokes operates 2,231 betting shops and Gala Coral has about 1,850.

The combined group will be larger than current leader William Hill and is likely to seek to aggressively grow its share of the online market.

CMA inquiry chairman Martin Cave said: ‘We’ve provisionally found that the merger may be expected to reduce competition and choice for customers in a large number of local areas.

‘Although online betting has grown substantially in recent years, the evidence we’ve seen confirms that a large number of customers still choose to bet in shops.’

The CMA said a healthy rivalry would mean bookies continued to offer free bets and discounts to lure punters.

An overly dominant company could also see consumers offered worse odds, it said. Ladbrokes and Coral are in talks with several potential buyers, with Betfred widely seen as a front-runner.

‘This is a significant step forward,’ a Ladbrokes spokesman said. ‘Our focus now will be agreeing the remedies with the CMA and finding the appropriate buyer or buyers for the shops.’

The announcement followed a day of comparatively heavy trading on Thursday which saw 6.7m shares worth around £8.1m change hands. This was the highest volume for around two months.

And there was also a flurry of activity on the options market, which allows traders to place bets on whether prices will go up or down. Thursday saw bets on 134,000 shares that the price would rise, according to data from the Intercontinental Exchange group – after a week in which none were placed at all. It suggests there was a high degree of confidence that the deal would be approved and share prices would jump, although experts dismissed any suggestion of insider trading.

Steve Clayton, head of equity research at broker Hargreaves Lansdown, said: ‘The proposals from the Competition Authority are actually less onerous than many had feared. The merger between Ladbrokes and Coral could create a huge opportunity for the group, if they can execute it properly. The combined company would have a dominant retail position, even if many shops have to be sold off.’

Ladbrokes and Coral announced their merger in July, and it follows a previous attempt which was blocked by regulators in 1998.

Last year, a £5bn tie-up between Paddy Power and Betfair created one of the world’s largest online bookmakers.