November 2, 2017 / 10:44 AM / 2 years ago

Britain's GVC readies for deals with sale of Turkish operations

LONDON (Reuters) - British online gambling company GVC (GVC.L) is selling its Turkish operations for up to 150 million euros ($175 million) in a deal that removes a hurdle to a potential takeover of Ladbrokes Coral LCL.L or another rival.

FTSE 250-listed GVC said on Thursday that it had agreed to offload its Turkey-facing businesses to Ropso Malta, which provides IT services for the British company’s Turkish operations.

GVC’s business in Turkey, a so-called gray market where many types of gambling are banned, were an obstacle to the company agreeing a takeover of Ladbrokes this year.

Ladbrokes shares climbed more than 5 percent on Thursday amid speculation that a takeover by GVC is now more likely. GVC shares edged up by 0.5 percent, giving it a market capitalizations of 2.9 billion pounds ($3.84 billion), compared with 2.4 billion pounds for Ladbrokes.

“Turkey was an issue that I feel we could have resolved (with Ladbrokes),” GVC Chief Executive Kenny Alexander told Reuters.

“If we wanted to participate in consolidation, be it Ladbrokes or anybody else, or be a target ourselves, then this (the Turkey sale) is clearing the path for that.”

The disposal comes two days after the British government unveiled proposals to cut the maximum stake allowed on gambling machines in UK betting shops, which could hit profits at companies including Ladbrokes and potentially trigger a wave of sector consolidation as gaming businesses seek to offset the financial impact.

Alexander said that GVC is “unlikely” to strike a deal with a competitor until the government has completed its consultation process on betting machine stakes and made a final decision.

He added that talks with Ladbrokes had ended after they leaked in August and that the government review had also been an obstacle to a deal.

“There are a number of other potential M&A targets that we could look to explore and don’t be surprised if it’s not Ladbrokes,” he said, adding that GVC is not currently in any discussions.

A Ladbrokes spokesman declined to comment.

As well as paving the way for potential M&A, the disposal makes GVC more attractive to investors who had been deterred by the company’s exposure to Turkey, Alexander said.

Regulated and locally taxed markets perceived as less risky will account for about 75 percent of the company’s net gaming revenue after the Turkish disposal, which is expected to complete by the end of December.

Reporting by Ben Martin; Editing by David Goodman

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