JOINT ANNOUNCEMENT REGARDING PROPOSED RECOMMENDED MERGER

Transcription

1 THIS ANNOUNCEMENT, INCLUDING THE APPENDIX AND THE INFORMATION CONTAINED IN IT, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION, OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, HONG KONG, JAPAN, NEW ZEALAND, SINGAPORE, SOUTH AFRICA OR ANY OTHER STATE OR JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. 24 JULY 2015 JOINT ANNOUNCEMENT REGARDING PROPOSED RECOMMENDED MERGER

2 PROPOSED RECOMMENDED MERGER OF LADBROKES PLC AND THE CORAL GROUP TO CREATE A LEADING EUROPEAN BETTING AND GAMING GROUP The merger will create Ladbrokes Coral plc, a leading multi-channel and internationally diversified business with a compelling strategy to accelerate online growth, deliver substantial synergies and drive value. On an illustrative aggregated basis, Ladbrokes Coral plc will have net revenue of 2.1 billion (1) and 392 million (1) of EBITDA (excluding cost synergies of at least 65 million) and a pro forma market capitalisation of c. 2.3 billion (2). Strategic Rationale Potential for faster online growth through leading multi-channel technology, a dual-brand strategy enabling effective and efficient cross-brand marketing across a larger customer and revenue base. The largest UK Licensed Betting Office ( LBO ) estate which will be strongly cash generative, more efficient and sustainable in the long term. An extensive international portfolio of regulated businesses providing a platform for future growth with strong retail and online operations in Italy, Belgium and Spain and a rapidly growing online operation in Australia. Significant cost synergies of at least 65 million per annum, most of which will be delivered in the second year post-merger, underpinning shareholder returns. Commenting on today's announcement, Peter Erskine, Chairman of Ladbrokes, said: "This is a major strategic step for Ladbrokes which firmly accelerates our strategy to improve the customers experience and build recreational scale. Ladbrokes and Coral are two highly complementary businesses, with rich heritage and brand presence across the UK and internationally. Together, we will create a leading betting and gaming business combining strong brands with an attractive multi-channel offering and an extensive national and international coverage. The transaction will provide an attractive opportunity to generate considerable value for both sets of shareholders, through significant operating synergies and a strong cash flow profile." Commenting on today's announcement, Rob Templeman, Chairman of Gala Coral, said: "Today s announcement is testimony to the track record and achievements of the Gala Coral team in delivering a significant transformation of the business over the past four years. This strategic combination is a natural fit and will offer further opportunities for growth. Coral Group s online strength and high street presence will complement Ladbrokes established brand and footprint in the UK and internationally. Together, the two businesses will have a strong digital presence with market leading technology, innovation and access to significant resources to drive continued growth and deliver enhanced returns for all shareholders." 2

3 Key Transaction Terms Ladbrokes plc ( Ladbrokes ) and Gala Coral Group Limited ( Gala Coral ) have agreed the terms of a recommended merger (the Merger ) of Ladbrokes with certain businesses of Gala Coral, including Coral Retail, Eurobet Retail and Gala Coral's Online businesses (the Coral Group ) to create a leading European betting and gaming group that is better positioned to compete more effectively (the Combined Entity or Ladbrokes Coral ). To effect the Merger, Ladbrokes will issue new ordinary shares to the existing shareholders of Gala Coral representing 48.25% of the enlarged issued share capital (3) of the Combined Entity (prior to the c. 9.99% equity placing announced by Ladbrokes today). Existing Ladbrokes shareholders will own 51.75% on the same basis. At completion of the Merger ("Completion"), the following appointments will be made to the Board of the Combined Entity: - Jim Mullen, CEO of Ladbrokes, will be CEO; - Carl Leaver, CEO of Gala Coral, will be Executive Deputy Chairman for a term of 12 months post Completion and will lead delivery of the synergies; - John Kelly OBE, Senior Independent non-executive Director of Ladbrokes, will be non-executive Chairman; and - Paul Bowtell, CFO of Gala Coral, will be CFO. - In addition, the Board will include one non-executive Director from the Ladbrokes Board, one from the Gala Coral Board (who will be Rob Templeman) and a further three Independent non- Executive Directors to be selected jointly in due course. Under the terms of the Merger Agreement (as defined below), the Coral Group will be delivered with net debt of 865 million. The Combined Entity is expected to have leverage at Completion of c. 3x net debt to EBITDA, reducing to less than 2.5x within 12 to 18 months of Completion, reflecting the strong cash generation of the Combined Entity and substantial synergies. Ladbrokes Coral is expected to further reduce leverage to a medium term target of x, given the ongoing significant cash flow generation. Ladbrokes announced today a total dividend of 3p per share for FY 2015 with dividends remaining at this level until EPS cover exceeds 2x underlying EPS, at which time a 2x dividend cover policy would be adopted. It is expected that the new Board of the Combined Entity will adopt the same policy. Following Completion, Ladbrokes plc will be re-named Ladbrokes Coral plc and will continue to operate both the Ladbrokes and Coral brands in the UK. To assist in providing the flexibility for the Combined Entity to achieve integration and realise synergies, Playtech plc ( Playtech ) has agreed, conditional upon Completion, to accelerate the determination of amounts due to it under its marketing services agreement with Ladbrokes. The sum agreed is 75 million, of which 40 million shall be satisfied by way of the issue of shares in the Combined Entity on Completion (the Playtech Completion Shares ) and with a further guaranteed 35 million in cash paid upon delivery by Playtech of key operational milestones but, in any event, within 42 months following Completion. In addition, as a demonstration of its support for the proposed Merger, Playtech is expected to act as a cornerstone investor in taking up to 22.9% of the c.9.99% equity placing announced by Ladbrokes today. 3

4 Completion is conditional upon, inter alia, the approval of Ladbrokes existing shareholders and clearance from the Competition and Markets Authority (the CMA ). Both Ladbrokes and Gala Coral are confident that the Merger is deliverable and are committed to working closely with the CMA in its review. Enquiries: Ladbrokes plc Donal McCabe, Group Communications Director Richard Snow, Director of Investor Relations David Allchurch / Will Smith Tulchan PR Gala Coral Paul Bowtell, Chief Financial Officer Fiona Thorne, Director of Communications Steve Clift, Director of Corporate Development and IR Melanie Duke, Director of Tax and Treasury Jonathan Glass / Sarah West Brunswick PR Greenhill (Lead Financial Adviser and Joint Sponsor to Ladbrokes plc) David Wyles Pieter-Jan Bouten Michael Lord UBS (Financial Adviser, Broker and Joint Sponsor to Ladbrokes plc) William Vereker John Woolland Morgan Stanley (Financial Adviser to Gala Coral) Matthew Jarman Bill Hutchings Shirav Patel Goldman Sachs (Financial Adviser to Gala Coral) Anthony Gutman Nick Harper Stephen Little Ladbrokes and Gala Coral will be hosting an analyst presentation at the UBS, Ground Floor Conference Centre, 1 Finsbury Avenue, London EC2M 2PP from 8:30am (BST) today. A webcast of the presentation, with slides, will be available at and an audio feed is available by dialling +44 (0) pass code: A recording of the webcast will be available, at the same location, on the same day. Investors attention is drawn to the separate announcements by Ladbrokes plc regarding its c.9.99% equity placing and its updated strategy issued today for which it is responsible. Unless otherwise stated, terms in this announcement shall have the same meaning given in the announcement made by Ladbrokes on 23 June

5 PROPOSED RECOMMENDED MERGER OF LADBROKES PLC AND THE CORAL GROUP TO CREATE A LEADING EUROPEAN BETTING AND GAMING GROUP 1. Introduction Ladbrokes plc ( Ladbrokes ) and Gala Coral Group Limited ( Gala Coral ) today announce a proposed recommended merger (the Merger ) of Ladbrokes with the Coral Group to create a leading European betting and gaming group. The Boards of Ladbrokes and Gala Coral believe that the Merger offers significant benefits for their shareholders and customers. The Merger presents the opportunity to generate significant synergies and create a business model that is better positioned to compete effectively within the offline and online betting and gaming markets. The Combined Entity will be named Ladbrokes Coral plc, and will be headquartered in London. Application will be made for the ordinary shares of the Combined Entity to be admitted to listing on the premium segment of the Official List of the UK Listing Authority ( UKLA ) and to trading on the main market for listed securities of the London Stock Exchange plc upon Completion. 2. Key terms of the Merger and pro forma expected ownership To effect the Merger, Ladbrokes will issue new ordinary shares to the existing shareholders of Gala Coral representing 48.25% of the enlarged issued share capital of the Combined Entity (prior to the c.9.99% equity placing announced by Ladbrokes today). Existing Ladbrokes shareholders will own 51.75% on the same basis. The Merger is to be effected pursuant to a merger agreement between Ladbrokes and Gala Group Finance plc (a wholly owned subsidiary of Gala Coral) (the Merger Agreement ). Key terms of the Merger Agreement are set out in section 9, below. The Merger is conditional on, amongst other things, (i) the approval of Ladbrokes shareholders, and (ii) clearance from the CMA. Ladbrokes has also separately announced today the placing of up to 92,378,680 shares in the capital of Ladbrokes (the Placing ), representing up to c.9.99% of its current issued share capital. The Placing is not conditional on Completion. As a demonstration of its support for the proposed Merger, Playtech is expected to take up to 22.9% of the c.9.99% equity placing announced by Ladbrokes today. 3. Background to, and reasons for, the Merger Ladbrokes Coral will be one of the leading European betting and gaming groups providing its customers with a wide choice of products and the flexibility across channels. The combination of Ladbrokes and the Coral Group is compelling strategically and creates an entity with: The potential to deliver faster online growth On a combined basis, the online business generated c.20% (1) of revenues and would be a substantially increased player in the UK online market. Digital sportsbetting and gaming remain the key growth opportunities in our market and the Merger enables the Combined Entity to drive further online growth. This will be delivered through enhanced multi-channel, and marketing capabilities, and the ability to deploy shared innovation across multiple brands. 5

6 An effective multi-channel offer delivers higher value customers at lower cost and enhances customer experience, driving loyalty. The Coral Group has already deployed market leading multi-channel technology across its estate and Ladbrokes has announced today its new initiatives to deliver the same. Following Completion, we will use our combined technology and expertise to grow multi-channel customers and revenue. We intend to operate a dual-brand strategy in the UK, enabling us to give our existing loyal customers a consistent experience with the brands they favour, whilst providing additional products and best operating practices to both brands. We expect to maintain high levels of marketing investment across both brands, driving future growth whilst increasing marketing efficiency through joint procurement. We also intend to pool our digital innovation teams in order to strengthen our product pipelines. We will continue to focus on delivering innovation across our multiple brands, with the view to enhancing returns. Ladbrokes Coral will have market leading technology supporting its online operations. Ladbrokes and the Coral Group currently use similar technology platforms, including partnerships with suppliers such as Playtech, OpenBet and Scientific Games. This commonality is expected to accelerate integration without causing disruption to our customers. The UK s largest LBO estate strongly cash generative, more efficient and sustainable in the long term Although it is anticipated that the Combined Entity will need to dispose of retail stores to satisfy potential CMA requirements, the Combined Entity s UK LBO estate is expected to be the UK s largest, and a strongly cash generative asset. Our dual-brand strategy will ensure that our customers can retain their brand preference. The combined retail estate will continue to build on its track record of product innovation. The Merger also represents an opportunity to further improve shop efficiency through the reduction of central overheads and joint procurement. This will make the UK retail estate more resilient in the face of recent taxation increases. An extensive international portfolio of regulated businesses The international operations will represent c.11% (1) of the Combined Entity's revenue. Ladbrokes Coral will have strong retail and online operations in Italy (no.2 online), Belgium (no.1 retail) and Spain (no.1 retail) and an attractive and rapidly growing online operation in Australia (no.3 corporate bookmaker). Combining the substantial experience gained from these operations with the enhanced financial resources of the Combined Entity provides a foundation for future international growth. Significant synergies underpinning shareholder returns The Merger will create a financially strong business with significantly enhanced free cash flow. Key to delivering this is the integration of overlapping operational activities. Cost synergies of at least 65 million per annum are expected, realised in full by the third year after Completion. Around 35% of these will be delivered in year one and 85% in year two post-merger. The assumptions and analysis underlying this assessment have been independently reviewed by a third party accounting advisor. 6

7 The cash costs of realising this level of synergies are expected to be c x the run rate annual saving and will predominantly be incurred in the first year after Completion. In addition to the cost synergies above, the Combined Entity expects potential further upside from crossbrand marketing, cross-fertilisation of innovation and the transfer of operational best practices. 4. Capital structure and dividends Net debt of the Combined Entity is c. 1.3billion (3). Under the terms of the Merger Agreement (as defined below), the Combined Entity is expected to have leverage at Completion of c. 3x net debt to EBITDA, reducing to less than 2.5x within 12 to 18 months of Completion, reflecting the strong cash generation of the Combined Entity and substantial synergies. Ladbrokes Coral is expected to further reduce leverage to a medium term target of x, given the ongoing significant cash flow generation. Ladbrokes will have committed financing in place prior to the publication of its shareholder circular, which will be posted to Ladbrokes shareholders in due course. Further details of the circular are set out in section 12 below. Ladbrokes today has also announced its intention to pay a total dividend of 3p per share for FY 2015, consisting of 1p paid as an interim dividend and 2p paid as a final dividend. This level of dividend will continue until dividend cover exceeds 2x underlying EPS, at which time a 2x dividend cover policy is expected to be implemented. The same policy is expected to be adopted by the Combined Entity. 5. Directors, management and organisation The proposed Board of Ladbrokes Coral will comprise nine directors, the majority of whom will be independent. The proposed Board will be chaired by John Kelly OBE as non-executive Chairman (current Ladbrokes Senior Independent non-executive Director). Carl Leaver (current Gala Coral Chief Executive Officer) will serve as Executive Deputy Chairman for a fixed period of 12 months post-completion and will be responsible for delivering the synergies outlined in this announcement. Jim Mullen (current Ladbrokes Chief Executive Officer) will serve as Chief Executive Officer. Paul Bowtell (current Gala Coral Chief Financial Officer) will serve as Chief Financial Officer of the Combined Entity. In addition to the above agreed positions, the proposed Board will consist of one non-executive Director from the existing Ladbrokes Board, one non-executive Director from the existing Gala Coral Board (Rob Templeman) and three new independent non-executive Directors to be approved by the Boards of Ladbrokes and Gala Coral. The only management appointment confirmed outside the proposed Board is that Andy Hornby (current COO of Gala Coral) will serve as Chief Operating Officer responsible for UK Retail and Digital businesses, having been an integral part of the Coral turnaround. Other than incumbent directors of Ladbrokes, there are no agreements or arrangements at this stage between Ladbrokes and the proposed new appointees to the Board of Ladbrokes Coral. 6. Enhancing and integrating our technology platform Both Ladbrokes and the Coral Group benefit from using technology supplied by Playtech, a market leader in the provision of gambling software and services. 7

8 In order to assist in providing the flexibility for the Combined Entity to achieve integration and realise synergies from the combination of the Coral Group and Ladbrokes digital businesses, Playtech has agreed with Ladbrokes to amend, conditional upon Completion, the existing Playtech Marketing Services Agreement ( PMSA ) with Ladbrokes. As part of this arrangement, Playtech and Ladbrokes have agreed to accelerate the determination of amounts due to Playtech under the PMSA. The sum agreed is 75 million, of which 40 million shall be satisfied by way of the issue of shares in the Combined Entity on Completion and with a further guaranteed 35 million in cash paid upon delivery by Playtech of key operational milestones but, in any event, within 42 months following Completion. This will accelerate the integration of the two companies digital platforms and therefore the delivery of cost synergies. The additional benefits of this agreement are not reflected in the synergy estimate set out above and would reflect incremental value generation for the Combined Entity. In addition, as a demonstration of its support for the proposed Merger, Playtech is expected to act as a cornerstone investor in taking up to 22.9% of the c.9.99% equity placing announced by Ladbrokes today. Beyond what is set out in this section, no additional payments will be made to Playtech under the PMSA. 7. Employees Both Ladbrokes and the Coral Group attach great importance to retaining the skills and expertise of their management and employees. The Boards of Ladbrokes and Gala Coral believe that, although the combination of similar functions will necessarily lead to some operational restructuring, the increased size and strength of the Combined Entity will offer attractive career prospects for its employees. The existing employment rights of employees of both Ladbrokes and the Coral Group will be fully safeguarded. 8. Information about Coral Entities The Coral Group is one of Europe's largest betting and gaming groups based on annual gross win, with an established presence in the UK and Italy. The Coral Group is the principal part of Gala Coral and comprises of three main operating divisions: Coral Retail, Eurobet Retail and Online. For the avoidance of doubt, the Gala land based bingo clubs and the Gala Coral Propco companies, which are all owned by Gala Coral, will not form part of the Combined Entity. Coral Retail is the UK s third largest operator in the UK LBO market where it directly owns and operates 1,849 LBOs under the Coral brand as at June 2015, with an estimated share of approximately 21 per cent in calendar year 2014 based on gross win. Coral Retail has outperformed its UK listed competitors over the last two years with quarterly revenue growth outperformance ranging between 0% and 4% during that period, driven by innovative product offerings and differentiated, exclusive machines content. Coral Retail s multi-channel offering, Coral Connect, allows customers to access their online wallet in-shop through the use of the Connect card. The Connect offering is market leading, and has delivered over 200k higher value customers at low cost. Eurobet Retail operates in the Italian LBO market under the Eurobet brand via LBOs run on a franchise model. As at June 2015, Eurobet Retail owned 871 licences. Eurobet Retail has delivered significant growth over the last 2 years, driven by the rollout of 500 new licences in 2013, increasing its sports betting market share from 7.5% in Q1 CY 2013 to 14.1% in Q1 CY Eurobet Retail has an established multi-channel offering, and ongoing estate optimisation will help drive future growth. 8

9 The Coral Group operates online in the UK through three brands: Coral, Gala Bingo and Gala Casino. Each brand employs the same scalable and flexible technology platform which was completely replaced in 2012/13. The back office operations are fully integrated with each brand being marketed to different customer segments. The Eurobet Online business operates through the Eurobet.it website on separate proprietary technology and is available to Italian residents. Eurobet.it is now the no.2 online sports operator in Italy with growth underpinned by multi-channel acquisition through the retail estate. EBITDA for the Online business more than doubled in FY14 to 49.5 million, with momentum maintained in FY15, driven by mobile growth in particular. Net revenue percentage growth in CY 2014 of 50% was well ahead of all major competitors, and, on a cash basis, net revenue added of 65.8 million was in line with best in the market. Total net revenue of million was in line with Skybet and Ladbrokes. 9. Merger Agreement and details of the Merger Ladbrokes plc and Gala Group Finance plc, amongst others, have entered into the Merger Agreement, which sets out the terms on which the Merger will take place. Key terms and conditions of the Merger Agreement are: The Coral Group will be merged with Ladbrokes in consideration for 48.25% of the enlarged issued share capital of the Combined Entity (prior to the Placing) The Merger is conditional on clearance by certain regulatory authorities, including the CMA The Merger is conditional on the approval of Ladbrokes shareholders and on a Whitewash Resolution (and the grant of a waiver by the Takeover Panel) being passed, as described in section 13 below The Combined Entity will be named Ladbrokes Coral plc and application will be made for the shares of the Combined Entity to be admitted to listing on the premium segment of the Official List of the UKLA and traded on the main market for listed securities of the London Stock Exchange plc Ladbrokes and Gala Coral have agreed certain termination rights, including in the event of a material adverse effect prior to Completion. The parties have also agreed that, if Ladbrokes receives a takeover approach, Ladbrokes is required to reject that approach within 14 days otherwise Gala Coral is entitled to terminate the Merger Agreement The four key shareholders of Gala Coral and Gala Coral management have undertaken not to dispose of the consideration shares for a period of six months from Completion, subject to customary carve-outs and save for consideration shares with a value of 40 million which will not be locked up in this way A break fee of 1% of the amount equal to the market capitalisation of Ladbrokes is payable to Gala Group Finance plc if the Merger is terminated because: (i) Ladbrokes' shareholders vote against the Merger, (ii) the Board of Ladbrokes changes its recommendation to shareholders, or (iii) Ladbrokes recommends a takeover proposal from a third party A shareholder circular and prospectus (as described in further detail in section 12 below) will be despatched to Ladbrokes existing shareholders in due course. 10. Competition and Markets Authority Completion of the Merger is conditional on, amongst other things, the approval of the CMA and the Republic of Ireland s Competition and Consumer Protection Commission. 9

10 The CMA will have jurisdiction to assess the deal under the UK Merger Regime and the deal is conditional upon clearance. The competitive dynamic has changed dramatically since the 1998 MMC Report and there is now significantly more competition from the online and mobile segments, from betting exchanges and on the high street, in particular with Betfred and Paddy Power growing aggressively in recent years. Ladbrokes and Gala Coral will engage early with the CMA and will work closely with it to ensure a successful outcome to the process. That said, both parties expect to make retail store disposals to satisfy any competition issues. The parties will use their best endeavours to ensure that any suggested remedies continue to deliver value to shareholders and realise the benefits of the Merger. 11. Settlement, listing and dealing Re-applications will be made to the UKLA for the ordinary shares of Ladbrokes Coral to be admitted to the premium listing segment of the Official List of the UKLA and to trading on the main market for listed securities of the London Stock Exchange plc (together "Admission"). Completion shall occur automatically immediately after Admission. The eligibility of the Combined Entity to be admitted to the Official List has not yet been agreed with the UKLA, although an application regarding the eligibility of the Combined Entity will be made in due course. Further details on settlement, listing and dealing will be included in the circular and prospectus to be sent to Ladbrokes shareholders in due course. 12. General meeting, circular and prospectus The Merger will require (i) the approval of Ladbrokes shareholders, and (ii) the readmission of the Combined Entity (given that the Merger is classified as a reverse takeover of Ladbrokes under the Listing Rules of the UKLA). A shareholder circular containing further details on the Merger, the directors of Ladbrokes recommendation in respect of the Merger, the notice of the general meeting and the resolutions required to approve the Merger is expected to be sent to Ladbrokes shareholders in due course. Ladbrokes will also be required to publish a prospectus in connection with the Merger, which it expects to do prior to Completion. The prospectus will set out, amongst other things, the material information on the Combined Entity. 13. Whitewash Resolution The issue of Ladbrokes shares at Completion to existing shareholders of Gala Coral may, for technical reasons, require a waiver from the Takeover Panel relating to obligations that might otherwise be incurred by Gala Coral shareholders to make a general offer for all of the ordinary shares of Ladbrokes under Rule 9 of The City Code on Takeovers and Mergers. Should such a waiver be granted by the Takeover Panel, it will require the approval by ordinary resolution of the independent shareholders of Ladbrokes at a general meeting (the "Whitewash Resolution") and this is expected to be put to shareholders at the general meeting referred to in the previous section. 14. Recommendation of the Board of Ladbrokes The directors of Ladbrokes, who have received financial advice from Greenhill and UBS, consider the terms of the Merger to be fair and reasonable. In providing advice to the directors, Greenhill and UBS have relied upon the directors commercial assessment of the Merger. Accordingly, the directors of Ladbrokes intend unanimously to recommend that Ladbrokes shareholders vote in favour of the resolutions to be proposed at the general meeting. 10

11 Notes: (1) Illustrative aggregated financials based on Ladbrokes figures for the LTM to 30 June 2015 and Coral Group figures for the LTM to 11 April (2) The pro-forma market capitalisation is based on the closing share price of Ladbrokes plc on 23 July Synergies and the Placing have been ignored for the purposes of calculating the figure. (3) Illustrative aggregated financials based on Ladbrokes figures as of 30 June 2015 and proposed Coral Group net debt of 865 million. IMPORTANT NOTICE: The information contained in this announcement is not for release, publication or distribution to persons in Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, the Republic of South Africa or the United States or in any jurisdiction where to do so would breach any applicable law. No public offer of securities is being made by virtue of this announcement. This announcement has been prepared for the purposes of complying with the applicable law and regulation of the United Kingdom and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws and regulations of any jurisdiction outside of the United Kingdom. Greenhill & Co International LLP ( Greenhill ) is authorised and regulated by the Financial Conduct Authority in the United Kingdom. UBS Limited ( UBS ) is authorised by the Prudential Regulation Authority (the "PRA") and regulated by the Financial Conduct Authority and the PRA in the United Kingdom. Greenhill and UBS are acting for Ladbrokes and are acting for no one else in connection with the Merger and will not regard any other person as a client in relation to the Merger and will not be responsible to anyone other than Ladbrokes for providing the protections afforded to their respective clients, nor for providing advice in connection with the Merger or any other matter, transaction or arrangement referred to herein. Morgan Stanley & Co. International plc ( Morgan Stanley ), which is authorised by the PRA and regulated by the Financial Conduct Authority and the PRA in the UK, is acting as financial adviser to Gala Coral and no one else in connection with the Merger. In connection with such matters, Morgan Stanley, its affiliates and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person for providing the protections afforded to their clients or for providing advice in relation to the Merger, the contents of this announcement or any other matter referred to herein. Goldman Sachs International ("Goldman Sachs") is authorised by the PRA and regulated in the United Kingdom by the Financial Conduct Authority and the PRA. Goldman Sachs International is acting exclusively for Gala Coral and no one else in connection with the Merger. Goldman Sachs International will not regard any other person (whether or not a recipient of this document) as a client in relation to the Merger and will not be responsible to anyone other than Gala Coral for providing the protections afforded to their client nor for the giving of advice in relation to the Merger or any transaction, matter or arrangement referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on Greenhill and UBS in their capacities as sponsors by the Financial Services and Markets Act 2000, as amended, neither Greenhill nor UBS accept any responsibility or liability whatsoever and make no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, fairness, sufficiency, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with Ladbrokes and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of Greenhill and UBS accordingly disclaim to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement. Each of Greenhill and UBS and/or their affiliates provide various investment banking, commercial banking and financial advisory services from time to time to Ladbrokes. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if and when published, the public documentation and, if given or made, such information or 11

12 representations must not be relied on as having been authorised by Ladbrokes, Greenhill or UBS. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of Ladbrokes since the date of this announcement or that the information in it is correct as at any subsequent date. This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of Ladbrokes. These statements, which contain the words anticipate, believe, intend, estimate, expect, may, will, seek, continue, aim, target, projected, plan, goal, achieve and words of similar meaning, reflect Ladbrokes' beliefs and expectations and are based on numerous assumptions regarding Ladbrokes present and future business strategies and the environment Ladbrokes and, if the Merger proceeds, the Combined Entity will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of Ladbrokes or, if relevant, the Combined Entity to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond Ladbrokes or, if relevant, the Combined Entity s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as Ladbrokes or, if relevant, the Combined Entity s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which Ladbrokes operates or in economic or technological trends or conditions. Past performance of Ladbrokes cannot be relied on as a guide to future performance. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The list above is not exhaustive and there are other factors that may cause Ladbrokes or, if relevant, the Combined Entity s actual results to differ materially from the forward-looking statements contained in this announcement. Forward-looking statements speak only as of their date and Ladbrokes, its parent and subsidiary undertakings, the subsidiary undertakings of such parent undertakings, Greenhill and UBS and any of such person s respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. You are advised to read this announcement and, if and once published, the public documentation in its entirety for a further discussion of the factors that could affect Ladbrokes future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per share of Ladbrokes for the current or future financial years would necessarily match or exceed the historical published earnings per share of Ladbrokes. Certain figures contained in this announcement, including financial information, have been subject to rounding adjustments. Accordingly, in certain instances, the sum or percentage change of the numbers contained in this announcement may not conform exactly with the total figure given. Except as explicitly stated, neither the content of Ladbrokes' nor the Coral Group's website, nor any website accessible by hyperlinks on the Ladbrokes' or the Coral Group's website is incorporated in, or forms part of, this announcement. Ladbrokes will in due course send a circular to Ladbrokes shareholders convening a general meeting to approve the Merger (the Circular ). Any decision by Ladbrokes shareholders to vote in favour of the resolution to be proposed at the general meeting should be based on the information published in the Circular. Ladbrokes will also, in due course, be required to publish a prospectus in connection with the Merger (the Prospectus ), which will set out, amongst other things, the material information on the Combined Entity. Application will be made, in due course, to the UK Listing Authority (the UKLA ) for the re-admission of the ordinary share capital of the Combined Entity to the premium listing segment of the Official List of the UKLA and to the London Stock Exchange plc for such ordinary share capital to be admitted to trading on the London Stock Exchange plc's main market for listed securities. 12

13 This announcement is for information purposes only and does not constitute a prospectus or offering memorandum or an offer in respect of any securities and is not intended to provide the basis for any decision in respect of Ladbrokes or any other entity and should not be considered as a recommendation that any investor should subscribe for or purchase any such securities. Neither the issue of this announcement nor any part of its contents constitutes an offer to sell or invitation to purchase any securities of Ladbrokes or any other entity and no information set out in this announcement or referred to in other written or oral information is intended to form the basis of any contract of sale, investment decision or any decision to purchase any securities in it. This announcement comprises an advertisement for the purposes of paragraph 3.3R of the Prospectus Rules made under Part VI of the FSMA and not a prospectus. Any prospectus in connection with the Merger will be published at a later date. Investors should not subscribe for or purchase any securities referred to in this announcement except on the basis of information contained in the prospectus and any supplementary prospectus. Any decision to purchase or subscribe for securities in connection with the Merger described in this announcement should be made solely on the basis of the information contained in such prospectus and any supplementary prospectus. Copies of the prospectus will, following publication, be available from the website of the National Storage Mechanism at and Ladbrokes registered office. 13

14 APPENDIX Information in this Appendix to the announcement has been extracted from the announcement made by Ladbrokes on 23 June 2015 in respect of the potential Merger. The information is without material adjustment, aside from the last twelve months ( LTM ) performance to 11 April 2015 which has been added herein. Introduction The Coral Group is one of Europe's largest betting and gaming groups based on annual gross win, with an established presence in the United Kingdom and Italy. The Coral Group is the principal part of Gala Coral and comprises three main operating divisions: Coral Retail, Eurobet Retail and Online. For the avoidance of doubt, the Gala land based Bingo operations or the Gala Coral Propco companies, which are all owned by Gala Coral, will not form part of the Combined Entity. Coral Retail Coral Retail is a large operator in the UK LBO market where it directly owns and operates 1,849 LBOs under the Coral brand as at June 2015, with an estimated share of approximately 21 per cent in calendar year 2014 based on gross win. LBOs operated by Coral Retail offer both over-the-counter ("OTC") betting and LBO machines. The OTC betting services of Coral Retail offer customers a wide range of betting opportunities including all mainstream domestic and international sporting events. Eurobet Retail Eurobet Retail is one of the largest operators in the Italian OTC sports betting market based on annual gross win, which is generated primarily from football betting operations, with a smaller share in the horse race betting market. Eurobet Retail operates in the Italian LBO market under the Eurobet brand via LBOs run on a franchise model. As at June 2015, Eurobet Retail operated 871 licences and generated over 95 million in annual gross win, and represents 15 per cent (by turnover) of the Italian OTC betting market. In addition to its operations in the Italian OTC betting market, Eurobet Retail also has exposure to the Italian LBO machines market, where it enters into revenue sharing arrangements with operators of LBO machines who site their LBO machines within Eurobet Retail's LBOs. Online The Coral Group operates online in the United Kingdom through three brands: Coral, Gala Bingo and Gala Casino. Each brand employs the same underlying scalable and flexible information technology platform with integrated back office operations, but each brand is marketed to different customer segments. The Eurobet Online business operates through the Eurobet.it website on separate proprietary technology and is available to Italian residents. The Online Division has experienced recent significant growth, with an increase in total active customers of 106 per cent in the two years to September

15 Accounting policies and historical financial information relating to the Coral Group Ladbrokes prepares its consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), whereas Gala Coral prepares its consolidated financial statements under United Kingdom Generally Accepted Accounting Principles. As the Coral Group is a subset of Gala Coral, financial statements for Gala Coral also include entities which would not form part of the Combined Entity. Therefore, unaudited "carve-out" accounts have been prepared for the Coral Group for the financial years ended 29 September 2012, 28 September 2013 and 27 September 2014 (collectively the "Carve Out Accounts"). The Carve Out Accounts have been prepared under IFRS. In accordance with Listing Rule G(1), the Carve Out Accounts are set out in the annexe to this document. No material differences between the accounting policies adopted by the Group and those adopted by the Coral Group in the Carve Out Accounts for the years presented in this announcement have been identified. The Group accounts and the Carve Out Accounts have recorded some transactions in different financial statement line items in the income statement. These differences include the separate recognition of cost of sales and administrative costs in the Carve Out Accounts and the classification of interest on the IAS 19 pension asset. These differences in presentation have no impact on overall profit before tax. Key non-financial operating and performance information on the Coral Group In accordance with Listing Rule G(2), set out below is the key non-financial operating and performance information relating to the Coral Group, as well as trend information for the period from 28 September 2014 to the date of this announcement. Coral Retail The UK OTC betting segment has remained broadly stable since Growth in football betting (which is higher margin), numbers betting and other sports betting has offset a decline in more traditional betting on sports such as horse and greyhound racing. The UK retail market divides into LBO machines (which comprises approximately 50 per cent of market gross win and a similar percentage of Coral Retail's gross win) and OTC betting, which comprises the remainder. LBO machines were first introduced into betting shops in 2001, and are currently restricted to four terminals per shop. Coral Retail, like Ladbrokes, has a fully deployed machine estate. Again, like Ladbrokes, these machines are manufactured by The Global Draw (a UK subsidiary of Scientific Games Corporation). LBO machines provide betting and gaming opportunities in two categories: roulette and slots games. A key determinant of Coral's slots games profitability is the level of exclusive content available to players. Such exclusive content (generated either through an in-house development team or through arrangements with key suppliers) has proven more profitable and more sustainable. The UK LBO machines segment has grown with a compound annual growth rate ("CAGR") of 10 per cent since 2004, and is a key component of LBO profitability growth. Taxation and regulatory changes are key factors affecting UK retail profitability, with the increase in Machines Games Duty and the introduction of new rules around player supervision driving an annualised FY15 incremental cost of 26.3 million. Coral has created a close integration between retail and online player experiences. The Coral Connect card permits a shared wallet to be used across online and retail, which delivers greater convenience to customers, permits easy player supervision and allows targeted incentives to further responsible play. Multi-channel customers have been shown to be more efficient to acquire, higher spenders and more loyal. 15

16 Eurobet Retail Retail betting licences in Italy are supply constrained. The last auction for Italian licences occurred in 2013, when Eurobet won 500 new licences which comprised 25 per cent of those made available in the tender. Following the roll-out of these shops, Eurobet has a 14 per cent share (by turnover) of the Italian retail sports betting market. Since the Italian business is predominantly football focussed, it has attractive margins. Eurobet Retail runs on a franchise model; a Eurobet franchisee will take risk on the fixed costs of a shop in exchange for commissions which are generally based on a percentage of positive net revenue. This model gives the business flexibility to roll out new shops efficiently and to relocate licences within Italy. Whilst the Italian market is regulated, there remains an active illegal market of approximately half the size of the legal market for sports betting. Improved enforcement of Italian regulation would be a key driver of growth for Eurobet Retail. Key drivers of organic growth in this business also include the launch of in shop bet-in-play and virtual betting. The existing licences for OTC betting business expire in June 2016 and the Coral Group intends to participate actively in any renewal process once details become available. Online The UK online market has grown with a CAGR of 10 per cent since 2012, and the Coral UK online business has exceeded this growth rate substantially, growing at a CAGR of 57 per cent. This growth has been driven by a complete relaunch of the UK online business in 2012, using new technology and a new base of operations in Gibraltar. The Coral Group's estimated share of 6 per cent of the UK online market is substantially lower than its share of the retail market, creating an opportunity for further online growth as the value of its familiar high street brand is realised. The UK online business now shares key members of its management team (including the COO) with Coral Retail. This is of significant value in promoting multichannel products and integrated customer relationships through Coral Connect. Growth in the market itself is driven by significantly enhanced mobile offering (now over 60 per cent of Coral UK active customers), an increasingly rich and diverse product set and improved player relationship management. Taxation changes are also key factors affecting UK online profitability, with the implementation of the Point of Consumption Tax in the UK in December 2014 driving an annualised FY15 incremental cost of 35.7 million. Eurobet Online operates under the same management team as Eurobet Retail and is the second largest operator in the Italian market. Customers are either acquired directly or by affiliation with retail franchisees. These franchisees are incentivised to recruit online players through an ongoing share of net revenue. Online growth is therefore in part driven by growth in retail. The Italian market has a rapidly growing online population and has further potential as smart phone penetration is 14ppts behind the UK market. Telebet This is a call centre betting business, based in Barking, UK. The business operates using the UK online systems. Player volumes are in gradual decline as Coral drives customers to move online, where customer experience is richer and costs to serve are lower. 16

17 Carve out accounts for Coral Group Basis of preparation The Carve Out Accounts are presented in pounds sterling, which is Gala Coral and the Coral Group s functional and presentational currency. All values are in millions () rounded to one decimal place except where otherwise indicated. The Carve Out Accounts have been prepared in accordance with the requirements of the Prospectus Directive (PD) regulation, the Listing Rules, and in accordance with this basis of preparation. This basis of preparation describes how the Carve Out Accounts have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). IFRS does not provide for the preparation of combined historical financial information or for the specific accounting treatment set out below, and accordingly in preparing the Carve Out Accounts certain accounting conventions commonly used for the preparation of historical financial information for inclusion in investment circulars as described in the Annexure to SIR 2000 Standards for Investment Reporting applicable to public reporting engagements on historical financial information issued by the UK Auditing Practices Board have been applied. The Carve Out Accounts are prepared on a combined basis and therefore do not comply with the requirements of IAS 27. The Carve Out Accounts have been prepared by aggregating the results, assets and liabilities of each of the divisions which make up the Coral Group by applying the principles underlying the consolidation procedures of IAS 27 (revised) Consolidated and Separate Financial Statements for each of the three years presented. In adopting IFRS for the first time, the following exemptions in IFRS 1 were applied: Business combinations Business combinations that took place prior to 25 September 2011 have not been restated. Cumulative translation differences Cumulative translation differences for all foreign operations have been set to nil as at 25 September The Carve Out Accounts have been prepared on a going concern basis and under the historical cost convention, except for certain areas where fair value measurement is required by IFRS. The Carve Out Accounts are presented in pounds sterling, which is also Gala Coral and the Coral Group s functional currency. The functional currency of the subsidiaries is the currency of the primary economic environment in which they operate. The following summarises the accounting and other principles applied in preparing the Carve Out Accounts: Transactions and balances between entities included within the Carve Out Accounts have been eliminated. All intra-group balances, transactions, income and expenses and profits and losses (including unrealised profits arising from intra-group transactions) have been eliminated on combination. Transactions between Gala Coral and the Coral Group have been presented in the appropriate Income Statement and Balance Sheet line items of the Carve Out Accounts to which such transactions and balances relate. The Coral Group has not formed a separate legal group and therefore it is not meaningful to present share capital or an analysis of reserves. The net assets of the Coral Group are represented by the cumulative investment of Gala Coral (shown as Invested Capital ). 17

18 Funding balances within the Carve Out Accounts represent the net debt that is expected to persist in the Coral Group post transaction rather than forgiven as part of any pre transaction structuring. The rate of interest applied to funding balances within the Carve Out Accounts has been determined by Gala Coral s weighted average cost of capital relevant to that particular year. They are not necessarily representative of the finance costs and income that may arise in the future. Payments for overhead costs to Gala Coral for management oversight, administration, human resources, information technology, marketing and taxation support have been reflected in the Carve Out Accounts. Exceptional income/(costs) have been recharged to the Coral Group where they are directly attributable to the entities contained within the Carve Out Accounts. Current tax charges in the Carve Out Accounts have been based on the tax treatment of the income and expenditure in the legal entities in which they have arisen with adjustments made for consolidation purposes. Deferred tax assets and liabilities reflect the full historical deferred tax assets and liabilities recorded by the legal entities adjusted for IFRS. The tax charges recorded in the combined income statement and combined statement of comprehensive income are not necessarily representative of the tax charges that would have been reported had the Coral Group been an independent group throughout the period presented. They are not necessarily representative of the tax charges that may arise in the future. Finance costs and income recorded in the combined income statement are not necessarily representative of the finance costs and income that would have been reported had the Coral Group been an independent group throughout the period presented. Gala Coral has retrospectively adopted IAS 19 (Revised) Employee Benefits and IFRS 13 Fair Value measurement, which became effective for accounting periods beginning on or after 1 January The prior years have also been restated to reflect this change in accounting policies. Basis of consolidation Subsidiaries are entities over which the Coral Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether control exists over another entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Prior to 25 September 2011, the cost of acquisition also included costs directly attributable to the acquisition. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. Inter-company transactions, balances and unrealised gains on transactions between the Coral Group subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by Gala Coral. 18

19 Combined Income Statement Continuing Operations 53 weeks ended 29 September 2012 Before exceptional items Exceptional items Total 52 weeks ended 28 September 2013 Before exception al items Exception al items Total 52 weeks ended 27 September 2014 Before exception al items Exception al items Total Revenue Cost of sales (151.3) - (151.3) (192.0) - (192.0) (264.4) - (264.4) Gross profit Administrative expenses (395.2) (53.6) (448.8) (433.5) (13.0) (446.5) (486.7) (15.4) (502.1) EBITDA (53.6) (13.0) (15.4) Depreciation and amortisation (40.8) - (40.8) (45.3) - (45.3) (52.2) - (52.2) Impairment (104.1) (104.1) Other Operating operating profit/(loss) costs (53.6) (13.0) (119.5) 28.3 Financing costs (89.4) - (89.4) (88.5) - (88.5) (86.0) - (86.0) Income Financing income Profit/(loss) taxation Income tax before 63.2 (53.6) (13.0) (119.5) (56.9) (0.8) 9.4 (6.5) Profit/(loss) for the Income year 64.9 (50.8) (13.8) (96.9) (40.8) Profit/(loss) for the year attributable to the owners of the parent company 64.9 (50.8) (13.8) (96.9) (40.8) 19

20 Combined Balance Sheets Assets 29 September September September 2014 Non-current assets Intangible assets 1, , ,491.5 Property, plant and equipment Retirement benefit asset Deferred tax assets , , ,626.8 Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets 1, , ,700.3 Liabilities Current liabilities Trade and other payables (97.8) (108.5) (136.5) Other financial liabilities (3.4) (4.8) (4.5) Current income taxation (0.2) (0.4) (0.4) Provisions (1.6) (7.9) (2.7) (103.0) (121.6) (144.1) Non-current liabilities Other payables (3.8) (5.5) (6.7) Deferred tax liabilities (253.7) (223.4) (202.0) Provisions (7.2) (7.1) (18.4) Interest bearing loans and borrowings with other group companies (953.7) (933.3) (880.6) (1,218.4) (1,169.3) (1,107.7) Total liabilities (1,321.4) (1,290.9) (1,251.8) Net assets Equity attributable to owners of the parent Invested capital capital attributable to equity holders Total capital