Ladbroke sells Coral for pounds 390m

LADBROKE, the leisure group, yesterday put an end to the three- month race for Coral with the pounds 390m sale of the UK's third largest bookmaker to the venture capitalist Morgan Grenfell.

The deal with Morgan Grenfell Private Equity, the venture capital arm of Deutsche Bank, for the 827 Coral shops and two greyhound racing tracks will net Ladbroke a profit of around pounds 70m.

The price received by the hotel and gaming group, which is to retain Coral shops in Ireland and Jersey valued at pounds 26m, was well above City expectations and triggered a sharp rise in the company's share price. Ladbroke shares ended 13p higher at 238p.

The leisure group was forced into a fire sale of the outlets in September after the Government blocked its pounds 363m purchase of Coral from the brewing giant Bass on competition grounds. The authorities argued that Coral would have given Ladbroke, Britain's biggest bookmaker, a dominant position in the pounds 1bn a year UK betting market.

Morgan Grenfell said yesterday that it wanted to boost Coral's returns and was planning to float the chain in three-to-five years' time.

John Macintosh, an associate director at the venture capitalist, said that his company would upgrade Coral's IT systems and boost its telephone betting facilities. It would also refurbish some of the shops in a bid to make them more modern and women-friendly.

Mr Macintosh said there was scope for savings in head office costs but added that there were no "current plans" for redundancies at Coral's headquarters in Barking.

Morgan Grenfell emerged as the winner after a hotly-contested bid battle with financial and trade buyers.

The group outbid rival financial group Cinven's pounds 360m offer in the last round, after Stanley Leisure and the Tote, the two industry bidders, had dropped out in earlier stages. The Tote's offer, at pounds 375m, was higher than Cinven's but it is understood that Ladbroke rejected it because it feared a referral to the competition authorities.

Mr Macintosh denied that his company had overpaid for the Coral assets, which are valued at pounds 337m. "Coral is a really strong brand name and it makes the best profits margins in the business," he said.

He added that around pounds 250m of the total consideration would be funded through senior debt and, possibly, the issue of a junk bond. The remaining pounds 140m would come from internal funds. Securitisation - the issue of a high-yield bond backed by the shops' cash flow - was not on the agenda.