Dermot Desmond has written to Ladbrokes shareholders on the company’s proposed merger with Coral, saying that the transaction is not a good deal for them.
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The gains are “a signal that the market believes in the strategy”, he said, while the drop in Ladbrokes is “a clear indication that the market considers the proposed transaction to be value destructive for Ladbrokes’ shareholders”.
The operators announced the plans for the merger in July, and the deal is subject to the approval of existing Ladbrokes shareholders and clearance from the Competition and Markets Authority.
He founded betting exchange Betdaq in 2000 before selling it to Ladbrokes for €30 million in 2013.
He called on shareholders to vote against it at the company’s general meeting on November 24.
In a stinging letter, Desmond describes the merger as “the wrong deal” for Ladbrokes.
The fund manager also noted the business would be highly leveraged and that Ladbrokes would be increasing its exposure to betting shops and gaming machines at a time when they are coming under structural and regulatory pressures.
“His arguments are not without merit”, the fund manager said of Mr Desmond, adding that he had “nothing to lose” by meeting the billionaire.
He attacked John Kelly – to be chairman of the combined business – for an “abject” performance as chairman of Gala Coral, and Ladbrokes chairman Peter Erskine for leading the bookmaker down a “disastrous path”.
In a letter to shareholders Desmond, majority shareholder in Scottish football club Celtic, said Ladbrokes needs a new management team to shift more of its customers online, but said a merger was not the right way to achieve this.
Ladbrokes is headed by Glaswegian born executive Jim Mullen. The stock closed up 0.2pc at 109½p tonight.
Desmond added: “The lost profits from any such disposed shops may outweigh the unspecified synergies which the proposed transaction is hoped to yield”. The Gala Coral Group is owned by a group of private equity companies including Apollo, Anchorage and Cerberus.
In contrast the Ladbrokes shareholders have suffered a 66 per cent reduction in their dividends and will be saddled with debt multiples fifty percent higher than the current level, he said.
Ladbrokes said the businessman appeared to hold at least 1% shares in the company but possibly double that.
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Ladbrokes said in a statement: We note his [Desmonds] 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.
