In a letter to investors, Mr Desmond said the Ladbrokes board needs to evaluate “all strategic options” in a “very active M&A market.”
The transaction, announced in July, will give control to Coral’s private-equity owners, he wrote.
“The real winners in this transaction are the Coral shareholders,” Mr Desmond said in the letter, posted on the website www.saynotocoral.com. Ladbrokes said it’s “not surprised” by his views, and remains confident that shareholders, who vote on the deal next week, will see the merits of the combination.
The resistance by Mr Desmond, who sold the Betdaq betting exchange to Ladbrokes in 2013 and owns a stake in the bookmaker, complicates a deal that will bring together the second and third largest participants in the UK betting-shop industry.
The billionaire said the transaction will likely require significant disposals of betting shops to meet antitrust concerns, potentially assisting competitors.
The letter could encourage other suitors for Ladbrokes to come forward, according to Peel Hunt analyst Nick Batram. Ladbrokes shares have declined about 15% since the Coral deal was announced.
It’s been an active year for betting-industry consolidation as increased regulation and taxation cause companies to seek efficiencies through mergers.
Paddy Power agreed to acquire Betfair, while GVC Holdings is buying Bwin.party Digital Entertainment.
In his letter, Mr Desmond made reference to advances in the price of both Paddy Power and Betfair shares, 35% and 20%, respectively, since their merger was announced.
The gains are “a signal that the market believes in the strategy,” he said, while the drop in Ladbrokes is “a clear indication that the market considers the proposed transaction to be value destructive for Ladbrokes’ shareholders.”
Mr Desmond estimated that the Ladbrokes-Coral merger is likely to be delayed until the middle of next year as the UK Competition and Markets Authority assesses the combined company’s 44% share of the betting-shop market.
He also questioned the payment of £75m (€107m) to Playtech, Ladbrokes’ gaming software partner.