Ladbrokes Coral says it is holding "detailed discussions" regarding a takeover offer from rival GVC that values the bookmaker at £3.9bn ($5.2bn).
Based on the share prices of the two companies at close of business on 6 December, the possible offer values Ladbrokes Coral at 160.9p per share, plus a CVR of up to 42.8p per share.
In a joint statement, the companies said GVC has offered to buy Ladbrokes Coral for about £3.9bn.
GVC chief executive Kenneth Alexander is expected to lead the combined group, although the firms said plans for the final management line-up would be worked out over the coming weeks.
As mentioned above, the gambling companies in the United Kingdom have been preparing for further consolidation in the local betting industry for months now, with the dealmaking process being interrupted by the further regulatory measures imposed by United Kingdom authorities.
At the end of October, the UK Government revealed a crackdown on highly controversial fixed-odds betting machines which have been widely blamed for the constantly increasing number of gambling addicts.
The shares of Ladbrokes Coral rose 25 per cent following the announcement, while those of GVC climbed 7 per cent.
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For fast-growing GVC, which since making the jump from AIM to the full list last year has grown organically and through acquisitions such as Bwin.Party, this is its third attempt at a tie-up with Ladbrokes, following talks in August and a first tilt last year.
It comes amid a wave of consolidation in the sector, which has been under pressure pending the review, which is expected to significantly cut earnings from the lucrative betting machines - dubbed the crack cocaine of gambling.
Last month, GVC announced the sale of its Turkish subsidiary, removing a potential obstacle to a deal with Ladbrokes, which had raised this as one sticking point during August's talks. The reduction is expected to badly hit the income from Ladbrokes Coral's 3,500 betting shops, potentially reducing the firm's net value.
Ladbrokes Coral was created out of the merger of Ladbrokes and Gala Coral in November previous year. The latter would fall as online grows, he added.
Now, the Boards of GVC Holdings and Ladbrokes Coral have revealed their belief that a deal between the operators could create material shareholder value that would position the combined company as a leading gaming and betting business on a global scale.
Houlihan Lokey and Investec are advising GVC on the deal, while Ladbrokes Coral is working with Greenhill and UBS.