Bookmakers Ladbrokes and Coral have agreed a merger, but the deal will have to overcome regulatory scrutiny concerning its potential market dominance.
The combined operation is expected to eclipse William Hill as the biggest bookmaker in the UK.
However it is widely expected that the Competition and Markets Authority (CMA) may force the new company into disposing of up to 600 shops.
The deal brings together 2,100 shops from Ladbrokes and 1,845 from Coral.
Any stores which the CMA forces into a sale could be of interest to rival bookmakers Paddy Power and Betfred.
Outside the UK, the new firm will also have operations in Italy, Belgium and Spain, and a growing online business in Australia.
International operations will now account for more than £1 in every £10 of revenue.
The merger includes Coral Retail, the UK bookmaking business, Gala Coral’s 870-strong Eurobet division in Italy and Coral’s online arm, but not the 132-site Gala bingo business.
Ladbrokes chairman Peter Erskine said: “This is a major strategic step for Ladbrokes which firmly accelerates our strategy to improve the customers’ experience and build recreational scale.
“Ladbrokes and Coral are two highly complementary businesses, with rich heritage and brand presence across the UK and internationally.
“Together, we will create a leading betting and gaming business combining strong brands with an attractive multi-channel offering and an extensive national and international coverage.”
Ladbrokes, which was slow to realise the potential growth in online and mobile, has seen its share price nearly halved since March 2013.
The announcement of the tie-up came as Jim Mullen, the chief executive of Ladbrokes, said the firm was embarking on an “urgent, overdue and essential” three-year investment programme to boost revenues in its shops and grow its online business.
He warned it would mean operating profits for the current year would be £20m lower than expected and slashed the full-year dividend to 3p, down from 8.9p the year before. Shares fell by 2.5%.
Punter-friendly results paved the way for a 38% decline in first-half operating profits.
Gala Coral boss Carl Leaver was quick to reassure employees by casting doubt on the scale of the forced shop disposal.
He added that although there will be “operational restructuring”, the “increased size and strength of the combined entity will offer attractive career prospects for its employees”.
Alongside its annual results in February, Ladbrokes announced plans to axe 60 betting shops as it continued to shake up its estate in readiness for a hike in taxation on gaming machines.
Ladbrokes aims to become the UK’s leading bookmaker for machine-based sports betting, hoping to grow the number of machines to 6,700 by the end of 2015.
Branded as the ‘crack cocaine’ of gambling because they are highly addictive, each of these machines deliver a gross win to Ladbrokes of £937 per week.
Fixed odds betting terminals are limited, by law, to four per shop.
On Thursday, Sky’s City Editor Mark Kleinman revealed that ex-HBOS chief Andy Hornby will become chief operating officer at Ladbrokes Coral plc.