Irish billionaire Dermot Desmond has launched a stinging attack on the management of Ladbrokes at its annual general meeting, but failed to scupper the company’s £2.3bn merger with Gala Coral.
Desmond, who owns Celtic Football Club, attended the meeting in London, which was called to ratify the deal to create the UK’s biggest bookmaker. It in effect involves privately owned Gala Coral buying Ladbrokes and listing on the stock exchange.
The financier said he intended to continue his fight even though shareholders overwhelmingly voted the deal through, although it is yet to be scrutinised by the Competition and Markets Authority. Desmond warned the merger could lead to forced disposals of between 400 and 1,000 shops as well as lost revenue. The enlarged business would have about 4,000 high street outlets.
“I believe there is widespread acceptance that the Ladbrokes board and management are not good enough and that performance over the past five years has been abysmal,” he told the meeting. “Total profit before tax has declined almost 40% in that period. Had it not been for a £90m increase in contribution from fixed-odds betting terminals, profits would have nearly been wiped out entirely.” Desmond owns 2.8% of the company.
“Shareholders won’t need me to remind them of the decline in the Ladbrokes share price, nor the fact that peers William Hill, Betfair and Paddy Power are 91%, 100% and 300% respectively ahead over that same period. Simply put, the board and the management team have not earned the right to be entrusted with the negotiation and completion of this deal,” he said. “In my opinion, in the end this could be a deal too far for Ladbrokes shareholders.”
The enlarged company intends to employ Andy Hornby, the former chief executive of HBOS and current chief operating officer of Gala Coral, in a senior role. The Ladbrokes board defended his position when asked about his role by a shareholder at the meeting. Hornby could face a ban from City regulators over his role at HBOS after a damning report into the 2008 rescue of the bank was published last week.
Speaking after the meeting, Desmond said he would not give up and may call other shareholder meetings. “This is only a start,” he said.
One of his concerns is a £75m payment to Playtech, the Ladbrokes software supplier, which he said was shared with other investors. Desmond said they were voting for the merger with Gala Coral “out of a sense of frustration and resignation with the current board and management”.
Desmond has previously complained to the Takeover Panel, which polices takeovers, about disclosure of information.
