GVC to avoid £700m Ladbrokes payout after FOBT stake cut

15 November 2018

GVC Holdings looks set to avoid paying out around £700m (€792.4m/$893.9m) to former investors in Ladbrokes Coral after the UK government agreed to introduce legislation to cut maximum stakes on fixed odds betting terminals (FOBTs).

Yesterday (November 14th), the government announced that it was to bring forward FOBT maximum stake changes and a 6% rise in Remote Gaming Duty to April 2019.

The FOBT change will be enshrined by a Statutory Instrument in Parliament this week according to a statement released by Culture Secretary Jeremy Wright on Wednesday. The stake cut was not mentioned in the Finance Bill, which sets out the government's spending and tax plans for 2019, although was referenced by Chancellor Philip Hammond in his Budget speech last month.

The announcement means that GVC will avoid a payment in relation to Contingent Value Rights (CVRs) set out as part of its acquisition of Ladbrokes Coral in March.

The CVR required GVC to make a payment of around £700m to former shareholders in Ladbrokes if legislation covering a cap on the maximum stakes for FOBTs was not passed before March 28th, 2019.

Analysts have said that GVC will now face a one-off cost of £80m as a result of the earlier implementation, thus saving the company around £600m.

An analyst from Berenberg Bank told Reuters: “With this risk dispelled, and with certainty on the regulatory outcome in the UK, we think many negative catalysts are out of the way.”

GVC shares were up 6.8% at the close of trading yesterday, but are trading down 4.38% at 785.00 pence per share this morning.

Last month Chancellor Hammond said in his Autumn Budget statement that both measures would be effective from October 2019. However this led to sports Minister Tracey Crouch resigning in protest at the decision, and prompted a cross-party rebellion in the House of Commons to push for the earlier implementation date, forcing the government into a U-turn.