LONDON (Reuters) - Bookmakers Ladbrokes (LON:LAD) and Gala Coral will have to sell between 350 and 400 shops to win clearance for their merger, the British competition regulator said on Friday.
In provisional findings, the Competition and Markets Authority said a tie-up between the second- and third-largest bookmakers may give rise to competition concerns in a large number of local areas.
"In order to resolve these concerns, around 350 to 400 shops may have to be sold for the merger to be conditionally cleared," it said.
Ladbrokes operates 2,154 betting shops in Britain and 77 in Northern Ireland and Coral operates around 1,850 betting shops in Britain. The combined group will overtake market leader William Hill.
Ladbrokes said the CMA's findings were a significant step towards completing the all-share merger.
"Our focus is to continue working with the CMA to progress the merger and find a buyer or buyers to deliver the remedies," a spokesman said.
Gala Coral, which is owned by a group of private equity companies including Apollo, Anchorage and Cerberus, also said it would continue to work with the CMA in order to agree the remedies.
Shares in Ladbrokes rose to 11-week highs after the CMA's findings, which were less onerous than some analysts had feared. They were trading up 10 percent at 131 pence at 1027 GMT.
Analysts at Credit Suisse (SIX:CSGN) said they had estimated 395 sales would be required, although there had been forecasts in the market for significantly higher numbers, ranging from 400 to 1,000.
"Many had concerns that the deal would be blocked completely based on national concerns arising from the expected large shop estate of the combined entity," they said.
Ladbrokes agreed the terms of a 2.3 billion pound all-share merger with Coral in July, and shareholders backed the deal in November.