GVC dodges an expensive bullet

According to the Reuters news service, GVC Holdings shares surged Wednesday on the news that the UK government had given in to political and media pressure and agreed to bring forward the implementation date for FOBT minimum stake cuts to April 2019.

The cause for the surge lies in a Contingent Value Rights security issued by GVC as part of its takeover of Ladbrokes in March 2018. The CVR required GVC to make the payment to former Ladbrokes shareholders if a cap on the maximum stake on fixed-odds betting terminals (FOBT) was not implemented by March 28, 2019.

Analysts estimate that the saving to GVC is around GBP 670 million, as the government’s revised implementation date negates the need for the CVR payment.

“The one-off cost to GVC of the earlier implementation of the FOBT cuts is around 80 million pounds, so materially less than it would have to pay out if implementation was delayed,” said Simon Davies, analyst at Canaccord Genuity.

GVC shares closed up 5.6 percent, posting their best day in two weeks.

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