A combination of GVC, which owns online gambling platforms including Partypoker and Sportingbet, and betting-shop operator Ladbrokes Coral could spark even more consolidation in the sector.
GVC's offer values Ladbrokes Coral at 160.9 pence per share, equating to a total equity value of around 3.1 billion pounds, plus a contingent fee of up to 42.8 pence a share, meaning the bookmaker could be valued at as much as 3.9 billion pounds.
Addleshaws is representing existing client GVC on the deal, led by corporate partner Nick Pearey, while Ashurst is advising Ladbrokes on another significant transaction, led by corporate partners Simon Beddow, Tom Mercer and James Fletcher.
Ladbrokes completed its £2.3bn (€2.6bn) merger with Coral in November previous year, but it is understood GVC first approached Ladbrokes over a tie-up when it was finalising the deal.
Ladbrokes had previously been in negotiations with GVC during the summer.
GVC's bid marks the biggest wager yet by Kenny Alexander, who would become chief executive of the combined group, which is expected to be large enough to enter Britain's FTSE 100 index.
Shares in Ladbrokes soared 28% to 174.2p in early trading on Thursday, while GVC climbed 8% to 979p.
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It would also get a potential further value of up to 42.8p, depending on the outcome of the United Kingdom government's Triennial Review into fixed-odds betting terminals (FOTBS) and its impact on profits.
Now, as the United Kingdom government's ongoing regulatory review continues to cast a shadow over the gambling sector, it would appear that Ladbrokes' management is keen to get a deal done.
Part of GVC's offer is conditional on the outcome of the government review.
The last round of takeover talks broke down in August amid reported disputes about the respective value of the companies.
"This triennial review has run and run and run and with the political climate in the United Kingdom who knows how much longer it may well run for?" he said. Ladbrokes Coral, whose traditional betting shops in the U.K.'s town centers are fading, would get more exposure to the expanding digital gaming business, while GVC could reach more potential customers for its online platforms.
Following a £2.3 billion merger a year ago between Ladbrokes and Coral, the firm became the UK's biggest High Street bookmaker. Based on results from the first half of 2017, he said that 56 percent of the enlarged company's earnings would come from digital and 38 percent from United Kingdom retail.
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.