The proposed merger between Ladbrokes and Coral would be bad for Ladbrokes for several reasons: 1) It would increase Ladbrokes' already large share of the declining retail betting market from 25% to 44%, likely requiring them to sell or close hundreds of shops. 2) The merger does not address Ladbrokes' weakness in proprietary technology and dependence on outsourced platforms. 3) Combining the companies doubles the risk to Ladbrokes from regulatory threats to their highly profitable fixed odds betting terminals.

1. Say No to Coral
The CoralTransaction: Why it’s bad for Ladbrokes

2. Coral Transaction: Why it’s bad for Ladbrokes
▪ The transaction increases Ladbrokes already huge share to the
declining retail LBO business from 25% to 44%.
▪ The Competition and Mergers Authority (‘CMA’) will likely take a very
hard look at a 44% share of the LBO market, likely delaying any
completion of the proposed merger until mid-2016 and likely
requiring disposal of shops.
▪ The likely requirement to sell or close 600 – 1,000 shops will open the
market to competitors such asWilliam Hill, BetFred and Paddy Power
to increase their presence in the market and target remaining shops.
▪ Lost profits from disposed shops > promised synergies?

3. Coral Transaction: Why it’s bad for Ladbrokes
▪ The huge growth in Fixed Odds BettingTerminal (‘FOBT/Machines’)
revenues and profits has been a critical contributor to Ladbrokes
profits. In 2014 Ladbrokes had a contribution after machine duty of
£346m from these machines.
▪ The huge profits coming from these machines have attracted
significant media attention and political pressure and remain under
regulatory threat. Any reduction in profits would be extremely
damaging to Ladbrokes and in merging with Coral it would be
doubling up on this risk.
▪ Ladbrokes had maintained a Debt/EBITDA target of 2.0x over the last
number of years while also paying an uncovered dividend payment.
It has now cut the dividend by 66%, but at the same time proposed
moving to a Debt/EBITDA ratio of 3.0x.

4. Coral Transaction: Why it’s bad for Ladbrokes
▪ Synergies promised not consistent with commitment to maintain
both the Coral and Ladbrokes brands and two trading teams.
▪ The margin on LBO sportsbetting in Ladbrokes at 16.5% is lower
than bothWilliam Hill and Coral, both c. 18% - the ability to close this
gap is seen as potential element in a Ladbrokes recovery.
▪ However that does not take into account the fact that Paddy Power
operates on a UK retail margin of c.11% despite being largely
credited with having superior pricing and risk management teams
and technology. There is a real danger that LBO margins will have to
move towards this level over time and the proposed merger greatly
increases the Ladbrokes exposure to this risk.

5. Coral Transaction: Why it’s bad for Ladbrokes
▪ This is being done to allow GalaCoral to move £865m of debt onto
the Ladbrokes’ balance sheet so as to present the Coral merger as a
Ladbrokes’ led transaction rather than the reverse takeover it
effectively is.
▪ Both Ladbrokes and Coral have outsourced their core technology
platforms, largely to Playtech in both cases. The failure of Ladbrokes
to develop a strong position in proprietary technology has been a
significant driver of its underperformance and the merger with Coral
does nothing to address this weakness.