Ladbrokes in merger talks with Gala Coral Group
Bookmaker Ladbrokes has said it is in talks with the board of Gala Coral Group over a possible merger.
A deal would create the UK's biggest bookmaker with nearly 4,000 High Street shops.
The discussions concern combining Ladbrokes with Coral Retail, Eurobet Retail and Gala Coral's online firms.
Ladbrokes said there was no certainty that the talks would lead to a deal, and possible terms and timings were also yet to be agreed.
Shares in Ladbrokes rose more than 11% after the announcement.
"A merger with Gala Coral could create a combined business with significant scale and has the potential to generate substantial cost synergies, creating value for both companies' shareholders," chief executive Jim Mullen said.
If the deal goes ahead, it would see the merged group overtake William Hill as the biggest UK bookmaker, bringing together around 2,100 shops from Ladbrokes and 1,845 from Coral.
The merger talks do not include Gala's 132-strong bingo business.
Mr Mullen added that the firm's board has yet to decide whether a deal would be "strategically attractive" and whether it could be "delivered to shareholders on appropriate terms."
The firm said that the deal, if completed, could be classified as a reverse takeover of Ladbrokes.
Ladbrokes previously attempted to buy Coral in 1998, but its planned takeover was blocked by the government.
The then Trade and Industry Secretary Peter Mandelson said a merger would lead to "a weakening of price competition at the national level" and a reduction in consumer choice.
Earlier this year, Ladbrokes reported a large fall in pre-tax profit for 2014, from £68m to £38m, and said that it expected to close 60 UK shops this year.
Those plans would be unaffected by any deal with Coral Group.