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LONDON, March 11 (Reuters) - Ladbrokes, Britain's second-largest bookmaker, is betting on a tie-up with gaming software developer Playtech to rack up earnings from growing demand for online gambling.
Playtech has finalised an agreement to advise and assist Ladbrokes with its digital services for an initial period of five years, the companies announced on Monday.
Ladbrokes, a familiar sight on Britain's high streets with 2,200 retail outlets, has struggled to keep up with the online offering of UK market leader William Hill.
Earlier this month, William Hill took full control of the internet venture it previously ran with Playtech, buying out Playtech's stake for 424 million pounds, as it looks to expand online.
The online gambling sector is seeing a wave of consolidation and deals, amid signs that the U.S. is readying to legalise it. Online gambling firm 888 announced two U.S. agreements on Monday.
The first new feature Ladbrokes' website customers will see is a 'Vegas' tab, giving access to a virtual casino.
The company said the deal with Playtech should help spur growth.
"I'm very confident that over the next five years this is going to allow us to accelerate our EBITDA (earnings before interest, tax, depreciation and amortisation)," chief executive Richard Glynn told Reuters. "What this will allow us to do is offer a comparable digital service."
Ladbrokes declined to specify how much profit it expects the deal to generate, but Playtech will receive an early instalment of its success fee - described by Glynn as a "no win no fee" arrangement - if base EBITDA uplifts of 35 million pounds ($52 million), 70 million pounds and 100 million pounds are achieved before 2017.
The deal boosted shares in both companies, among the top FTSE-350 risers on Monday. Ladbrokes shares were up 5.7 percent to 239 pence, having risen almost 50 percent in the past six months, while Playtech shares climbed 3.4 percent to 571 pence.