Ladbrokes Ignoring Small Shareholders' Interests?

Small shareholders in Ladbrokes, formerly part of the Hilton hotel group, are claiming that the company has neglected their interests by announcing a massive special dividend that will land them with hefty tax bills. The payout, worth £4.2 billion, is the largest special dividend in the company's 120-year history, but it goes against the wishes of small investors who had called for a tax-free return of cash through the issue of B shares. The UK Shareholders' Association slammed the decision, saying it would tax private shareholders at rates of up to 40 per cent, while the company's new finance director suggested they consult their financial advisers to find ways to mitigate the tax issue.

Key Takeaways:

• The special dividend, worth £4.2 billion, will be taxed as income at rates of up to 40 per cent for private shareholders.
• The UK Shareholders' Association, representing over 1,000 private investors, slammed Ladbrokes' decision, citing tax implications for small investors.
• The company's finance director, Rosemary Thorne, suggested that private investors consult their financial advisers to mitigate the tax issue.
• A 200-punt special dividend will be paid out to shareholders, attracting 37.5 per cent tax.
• The company's performance has been criticized by analysts, who noted a decline in gross win per machine and an increase in operating costs.
• The company will not enter the US market for online gaming until the summer, citing the ambiguous legal status of the industry.

Statistics:

• £4.2 billion: The value of the special dividend.
• 40 per cent: The maximum tax rate that private shareholders will face.
• 200: The number of additional betting shops that Ladbrokes' chief executive, Chris Bell, believes there is room for in the UK.
• £413.9 billion: Underscoring the strong performance of the company after the sale of the hotels division.
• 2,583: The number of Ladbrokes betting shops in the UK.

Sources:

• "UK's Ladbrokes to return 240p a share to shareholders in pounds 4.2bn special payout", The Guardian, 14 March [no date given].
• "Ladbrokes defies small investors with £4.2bn payout plan", The Telegraph, 14 March [no date given].
• "Ladbrokes unveils 10% rise in profit after hotel sale", Bloomberg, 14 March [no date given].
• Ladbrokes plc, Annual Report and Accounts 20__ (accountant's statement; exact date not specified).
• A press release from Grant Thornton, dated 21 April 2008 (referring to the accountant's suggestion regarding gifting shares to spouses).