GVC Holdings has said it is taking legal advice following the arrival on its doorstep of a bill for almost quarter of a billion dollars from the Greek taxman.
The company, which is in the process of finalizing a $4 billion takeover of Ladbrokes, was forced to disclose to shareholders that it had set aside $250,000 to pay the sum and additional penalties should its legal appeal fail. The revelation caused shares in both GVC and Ladbrokes to tumble on the London Stock Exchange.
The tax bill relates to the operations of GVC subsidiary Sportingbet in 2010 and 2011, but the amount is “substantially higher by multiples of the total Greek revenue generated by the subsidiary,” the company said in a filing on Thursday.
“The board strongly disputes the basis of the assessment calculation, believing the assessed quantum to be widely exaggerated and is confident in the grounds of appeal,” it added.
Beware of Greeks Bearing Tax Bills
Greece is struggling under the crippling burden of debt following the bailing out of its economy in the wake of the economic crisis. In February last year, the Greek government announced it owed $417.88 billion, largely to the International Monetary Fund (IMF), and sources at GVC believe this could have something to do with its recent mega-tax bill.
This is a spurious and opportunistic claim made on the background of a Greek government desperate to pay its debts to the IMF,” an anonymous source, described as “close to the company’s leadership,” told the Financial Times.
The source emphasized the bill would have no effect on the Ladbrokes takeover, but declined to comment further. A Ladbrokes spokesman echoed this position.
“We performed tax and regulatory due diligence on GVC’s international operations, including use of third party advice,” he told the FT. “We remain confident in the views we formed at the time of the deal.”
FOBT Cap Will Affect Ladbrokes’ Price
What may impact the takeover, however, are recent reports that the UK government intends to reduce the maximum stakes on FOBTs from £100 to £2.
When the deal was announced in November, it was expected the government would decrease the maximum stakes to £20 or £30, with few believing it would even consider the most drastic option on the table.
Ladbrokes, as the nation’s biggest retail bookmaker since its own recent takeover of Gala Coral, is the most exposed to the fallout from the drop in stakes, and GVC is likely to revise its $4 billion evaluation, should the £2 cap become a reality.