The Ladbrokes Coral Group PLC (LON:LCL) (LCL.L) share price has risen 25% today after it announced that it is in detailed discussions regarding a potential combination with GVC Holdings PLC (LON:GVC) (GVC.L).
The Isle of Man-based GVC, which has grown rapidly into one of Britain's biggest online gambling companies, and high street-based Ladbrokes held talks about a deal earlier this year but they broke down without agreement.
Should GVC go ahead with the offer, Ladbrokes Coral shareholders would receive 32.7p in cash and 0.141 ordinary GVC shares for each share, as well as a potential further value of up to 42.8p structured as a contingent value right.
GVC, which also owns Sportingbet and PartyCasino, has tabled a cash-and-shares approach valuing Ladbrokes at 160.9p a share, with loan notes on top worth an extra 42.8p a share.
GVC chief executive Kenneth Alexander is expected to lead the combined group, although the firms said plans for the final management line-up would be worked out over the coming weeks.
The government has said the maximum stake allowed in FOBTs could be sharply cut over concerns that the terminals fuel addiction.
"The boards believe that a transaction has the potential to create material shareholder value and that there is a compelling strategic rationale for the possible offer", said Ladbrokes Coral and GVC in a joint statement.
They added that the enlarged group would benefit from operating different brands across different markets including the UK, Italy and Australia.
Ladbrokes completed its £2.3bn merger with Coral in November previous year, but it is understood GVC first approached Ladbrokes over a tie-up when it was finalising the deal. In October it started a 12-week consultation to consider cutting the stake to between 50 pounds and 2 pounds, from the current 100 pound wage.
Ladbrokes Coral was created out of the merger of Ladbrokes and Gala Coral in November past year.
GVC said the deal would enhance earnings per share by a double digit level from the first full year of completion.
Speculation about a combination of GVC and Ladbrokes emerged past year.
"GVC's recent move to exit Turkey cleared the last barrier and LCL shareholders should be pleased to see the firm is now better insulated against the vagaries of the United Kingdom market", said Neil Wilson, senior market analyst at ETX Capital.