Ladbrokes and Coral could join forces to create the biggest bookmakers in the UK

A deal would see the two companies own 4000 of the 9000 betting shops in the UK

There has been a frenzy of takeover activity in the bookies sector as firms respond to tax hikes and regulation (PA Wire)

Ladbrokes and rival betting firm Coral are in talks to merge, creating the largest UK bookmaker as measured by number of betting shops.

Investors watched as shares in Ladbrokes shot up by more than 10 per cent on the news. Any deal would be billed as a Ladbrokes takeover by Coral, which is owned by private equity firms.

A deal would see the two companies own 4000 of the 9000 betting shops in the UK, outstripping its nearest competitor William Hill by almost 2000. The partnership would also create the third largest online business.

The deal is the first major move by Ladbrokes new chief executive Jim Mullen, who was appointed in April.

The tie-up was rejected by then trade secretary Peter Mandelson back in 1998 but Mullen said: "That was back then. The dynamic is quite a different one from where it was. You’ve got a whole online market that wasn’t there for a start, so that has a major influence. But to be clear there is a competition process to continue and we will liaise with authorities as appropriate."

Shore Capital’s Greg Johnson warned: "We see significant potential hurdles to the deal."

There has been a frenzy of takeover activity in the bookies sector as firms respond to tax hikes and regulation. Mullen added that the main point was scale, with savings from the combination likely to be ploughed into boosting its online offering.