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Dec 13 2017, 08:00 GMT
We believe that GVC’s proposed bid for Ladbrokes Coral makes sense strategically. It further de-risks the business from a regulatory standpoint and is opportunistic to the extent that GVC’s equity, a key component of the offer, looks fully valued to us. In our view, the proposed offer is both full and fair. We initiate coverage of GVC Holdings with a ‘Neutral’ rating. While we rate the management team and believe its strong track record bodes well for the future of the proposed merged group, we are concerned that the current valuation leaves no margin of safety. The uncertain regulatory landscape in Germany is a particular concern. A risk-adjusted valuation approach gives us a price target of 912p, 2% below yesterday’s closing price. As such, we initiate coverage with a ‘Neutral’ rating.