Exclusive: Sky Bet owner readies gambling firm for London IPO - sources

By Dasha Afanasieva and Ben Martin

LONDON (Reuters) - Sky Bet's majority owner CVC has hired investment bank Rothschild to examine a stock market listing of the British firm, seeking to take advantage of booming equity markets and the growing popularity of online gambling.

A flotation could value the Leeds-based business, which is led by Chief Executive Richard Flint, at between 2.5 billion pounds and 3 billion pounds ($4.2 billion) including debt, two people familiar with the process told Reuters.

Rothschild is organising a so-called beauty contest next week to choose the banks to arrange the initial public offering (IPO), one of the sources said.

Private equity firm CVC declined to comment, while Rothschild did not immediately respond to a request for comment.

Plans for a listing come amid an expected clampdown on gambling machines in British betting shops that may make Sky Bet, which is online-only, relatively more attractive.

A series of cancelled listings in London late last year unnerved some IPO investors, but bankers are still predicting a strong 2018 for European equity raisings.

A global stock market rally helped push London's biggest and midcap companies to fresh peaks in January.

CVC acquired an 80 percent stake in the betting business from pay-television operator Sky just over three years ago in a deal that at the time valued it at 800 million pounds.

Sky, which itself is in the target of a 11.7 billion-pound takeover by Twenty-First Century Fox Inc, still owns 20 percent of Sky Bet.

The British government is considering cutting the maximum stake that customers can place on fixed-odds betting terminals (FOBTs), machines that critics say fuel problem gambling.

The measures, which could see FOBT stakes cut to 2 pounds from 100 pounds, are expected to trigger a wave of deal-making among betting firms as they seek to offset the impact of the crackdown and shift away from high street shops.

In December, Ladbrokes Coral, Britain's largest betting shop operator with more than 3,500 sites, agreed to be bought by online gambling company GVC in a deal that gives the bookmaker a valuation of at least 3.2 billion pounds.

The deal has exemplified how the growing popularity of internet gambling has quickly transformed the industry, as more gamblers move online. While the Ladbrokes brand dates back more than 130 years, its new owner GVC was only founded in 2004.

($1 = 0.7101 pounds)

(Reporting by Dasha Afanasieva and Ben Martin; editing by Alexander Smith)