The final value of the deal is dependent on the outcome of a Government review of controversial fixed-odds betting terminals (FOBTs), which could see the maximum stake on the gaming machines reduced to as little as £2.
GVC Holdings Plc is in advanced talks to acquire United Kingdom bookmaker Ladbrokes Coral Group Plc for as much as 3.9 billion pounds ($5.2 billion), as gambling companies seek greater scale in a business that's shifting online.
GVC shares gained 5.72% to 961.0p each in morning trading while Ladbrokes Coral's stock jumped 25.42% to 170.20p.
The determination of the senior management positions are to be finalised over the coming weeks, but both parties have agreed that GVC's Kenneth Alexander will be the CEO of the enlarged group following completion.
On Thursday, they said GVC had made a non-binding cash and shares offer to Ladbrokes, with the final price determined by the outcome of the government's review into gambling machines in United Kingdom betting shops, which could hit profits at the target company.
The review is part of a government crackdown on FOTBs after MPs raised concerns the machines were too addictive and fuelled problem gambling.
The 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, depending on the outcome of the government review.
The two companies believe that a combination could create material shareholder value.
The firms said: "The enlarged group would be an online-led, globally positioned betting and gaming business that would benefit from a multibrand, multichannel strategy applied across some of the strongest brands in the sector". In October it started a 12-week consultation to consider cutting the stake to between 50 pounds and 2 pounds, from the current 100 pound wage.
Ladbrokes Coral, which operates 3,500 shops across England, Wales and Scotland, became the UK's biggest High Street bookmaker following last year's merger of Ladbrokes and Coral.
Terms of the offer mean that Ladbrokes Coral shareholders would hold 46.5% of the combined business, with GVC shareholders to other 53.5%.
Speculation about a combination of GVC and Ladbrokes emerged a year ago.
But he said that GVC's pricing hedge "makes sense", as did the strategic rationale for the deal.