GVC Holdings cancels judicial review of FOBT decision despite £160m hit
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GVC, holder of Ladbrokes Coral, has plead for present time for the implementation of the new £2 stake for B2 Gaming Machines, knowing that it will cost the company around £160m as soon as the cut is implemented, and stated that in won’t be on the look for judicial review of the Department for Digital, Culture, Media and Sport’s decision.
In an update to the stock market, the company said: “Whilst we welcome the certainty provided by the announcement, we are disappointed with the outcome, particularly given the previous independent evidence on stake cuts published by both the Gambling Commission and the Responsible Gambling Strategy Board.
“It is now important that the industry is given an adequate implementation period to help prepare and plan for the shop closures that will arise, including attempting to mitigate the impact of resultant job losses. Significant re-engineering of the machines and gaming software will also be required to effect these changes.”
It added: “Today’s Government announcement marks the end of uncertainty on FOBT staking limits. As a responsible business, we re-iterate our commitment to work closely with the Government and our regulators to ensure that both our retail and online offerings are places where customers can enjoy gambling in a safe and secure environment. In order to achieve a positive and constructive working relationship, GVC confirms that it does not intend to seek a Judicial Review of the Triennial Review decision.”
GVC said that their focus in the UK Retail operation over the last two years has been to create a business that is well placed to face these structural and regulatory headwinds. As such the firm expects to be able to reposition the business within two years following implementation, with an anticipated fully mitigated impact of c£120m on Group EBITDA secured by the end of this period. In the first full year the impact on Group EBITDA is anticipated to be in the region of £160m.
“Therefore, we expect to retain a profitable and highly cash generative UK Retail estate,” it added. “Furthermore, our proven leading multi-channel expertise presents additional opportunities to drive online growth.”
GVC reiterated that its offer for Ladbrokes Coral Group envisaged the possibility of a £2 maximum stake Triennial Review and today’s announcement has no impact on the minimum targeted synergies of at least £100m per annum.
It explained: “As part of the consideration paid for the acquisition of Ladbrokes Coral, GVC issued to each Ladbrokes Coral shareholder a Contingent Value Right (“CVR”) for each Ladbrokes Coral share that they held. The CVRs were constituted under a deed poll made by the Company (“CVR Instrument”), a copy of which can be found at www.gvc-plc.com.The value of each CVR, and therefore the value of any payment ultimately due from GVC to CVR holders, is directly linked to the outcome of the Triennial Review and certain laws enacted pursuant to it.
“Whilst there is a formal process and methodology for determining the value of the CVRs, which GVC will adhere to, the CVR Instrument envisages that if legislation is enacted prior to 28 March 2019 reducing maximum stakes to £2, as announced by the Government today, this will result in each CVR having zero value. In such circumstances no payment would be required to be made by GVC to CVR holders and the CVRs would be automatically cancelled.”
Source: European Gaming Industry News