LONDON (Reuters) - Bookmakers Ladbrokes (L:LAD) and Gala Coral must sell around 350 to 400 shops in order to obtain clearance for their proposed merger, Britain's competition regulator said on Tuesday.
The Competition and Markets Authority (CMA) said that a tie-up between Britain's second and third largest bookmakers may give rise to competition issues in 642 local areas.
The CMA said the sales must be substantially completed before the merger can go ahead.
"It is now for the parties to propose a divestment package and one or more suitable purchasers for the CMA to approve," said Martin Cave, who chaired the inquiry.
Ladbrokes operates around 2,227 betting shops in the UK and Coral around 1,850.
The combined group will overtake market leader William Hill (L:WMH).
Ladbrokes agreed the terms of a 2.3 billion pound all-share merger with Coral in July last year, and shareholders backed the deal in November.
Gala Coral is owned by a group of private equity companies including Apollo, Anchorage and Cerberus (CBS.UL).
Britain's betting sector is seeing a wave of consolidation.
On Monday William Hill, which is without a CEO, said it had received a preliminary takeover approach from casino operator Rank (L:RNK) and online gambling group 888 Holdings. (L:888).
Last year William Hill failed in a takeover attempt of 888 itself, while 888 had agreed to buy UK-listed Bwin.party but was jilted in favour of GVC Holdings (L:GVC).
Paddy Power (I:PPB) and Betfair agreed to join forces in September.
Shares in Ladbrokes, up 12 percent so far this year, closed on Monday at 134.2 pence, valuing the business at 1.4 billion pounds.