Extract of a note a senior figure in DCMS requested be sent to their private email account.
FOBTs – Understanding The CVRs
When GVC bought Ladbrokes Coral in March 2018 the 170 pence per share financing included Contingent Value Rights (CVRs). GVC created these ‘loan notes’ as a top up payment to the Ladbrokes shareholders which would be paid by GVC if it were to have the benefit of £100 stakes on FOBTs for longer than expected. This top up payment is £682 million.
However – as we might expect with bookmakers – GVC is trying a fast one and seeking to deny the shareholders the top up payment. This is shown in how it has designed the CVRs so that they are triggered by the enactment date not the implementation date.
GVC’s overall strategy is to stretch its FOBT revenues for as long as possible but not pay out the top up payment. If The Times was correct last week and the implementation is delayed until April 2020 then GVC will have a massive benefit of £15 million a week from FOBT income for two years – a total of around £1.5 billion.
Yet if enactment comes any time before midnight on the 28 March 2019 it would not have to pay any top up payment. By contrast an enactment any time after 00.01 on 29 March 2019 will mean that GVC would have to pay the shareholders the entire £682 million top up.
The £1.5 billion FOBT revenue for GVC would come from the gambling addicts whom IDS and John Hayes want to help.
The £682 million enactment windfall for GVC would come from the pension institutions and small shareholders which used to own Ladbrokes. If the shareholders do get the top up payment then the Treasury would get up to £144m in capital gains tax from them.
GVC is an offshore bookmaker which is betting on UK civil servants not spotting the game they are playing:
  • GVC’s arguments about the need to delay implementation to give them time to “configure” their systems are bogus. I spent seven years at Accenture and know that with adequate resources this could be done far faster – not least because the industry has known of the likely stake changes for many years so has had a long time to prepare.
  • GVC’s ‘agreement’ not to JR the stake reduction is because they are desperate for early enactment.