INVESTORS have signalled their appetite for Ladbrokes' mooted merger with privately-owned Gala Coral Group.
Shares in Ladbrokes soared by nearly 15 per cent after its Scots chief executive, Jim Mullen, confirmed talks between the two parties over a merger have taken place.
It comes just days after Mr Mullen, a former head of William Hill's digital business, told The Herald he was determined to take Ladbrokes back to the top of the UK gambling industry.
Mr Mullen said a merger with Gala Coral had the potential to deliver cost synergies and value for shareholders of both companies.
A merger could also close the gap on market leader William Hill, which has pulled away from competitors thanks in part to its online operation.
In what would be classified under listing rules as a reverse takeover of Ladbrokes, the merger would create a combined entity with more than 4,000 betting shops around the UK. Ladbrokes has 2,100, including 300 in Scotland, while Coral has more than 1,840 shops.
A previous attempt to merge the two companies was blocked in 1998 on competition grounds.
Analyst Augustin Eden at Accendo Markets said rise of online and mobile gambling since has increased the size of the marketplace and that merger would "still leave a plethora of competing players."
The analyst said: "Ladbrokes needs to match its rivals in the tech game, and Coral's bored of bingo - a streamlined marriage of the two (and combined de-listing) should be seriously be considered by those with voting rights. Investors are already betting on it."
Ladbrokes noted there is no certainty a deal will be concluded. And it said it may undertake a non-pre-emptive equity placing to strengthen the balance sheet of the combined entity should the deal go through.
Mr Mullen said: "Since becoming CEO my focus has been on a more aggressive plan to build digital scale and grow our recreational customer base across all channels, which is key to creating a more sustainable and growing Ladbrokes. My plans are well advanced and I look forward to presenting them to shareholders.
"A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies' shareholders.
"The board has not yet concluded whether a transaction is strategically attractive and can be delivered to shareholders on appropriate terms."
Gala noted that a merger could benefit shareholders of both companies, and said the company and its investors were evaluating all strategic options, including a possible initial public offering.
Shares in Ladbrokes closed up 17.9p at 140p.
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