Joe Lewis, the Bahamas-based British billionaire, is the mystery buyer behind a near-7 per cent stake in Ladbrokes, the UK's biggest bookmaker, The Times has learnt.

Speculation has swirled in recent weeks as to the identity of the buyer after Citigroup disclosed in a series of statements that it was holding shares as “contracts for difference” on behalf of one of its clients.

It is understood that Mr Lewis believes Ladbrokes shares are undervalued and he is thought to be keen to acquire more blocks if and when they become available.

The British-born investor hit the headlines recently when he paid $860 million (£440 million) for a 7 per cent stake in Bear Stearns, the American bank, which has been hit hard by the US sub-prime mortgage meltdown. He has since increased his holding to 8 per cent. He also owns a stake in Tottenham Hotspur Football Club and has in the past tried to acquire Victor Chandler, the betting group.

Sources close to the situation said that the investor had been quietly buying up shares in Ladbrokes for several months and that he raised his stake again last week. His holding is now thought to be worth about £300 million.

Although he currently is not believed to have any plans to launch a bid for Ladbrokes, it is understood that a takeover is one of the options on the table. Mr Lewis is known to be close to several of Ladbrokes's other investors, including John Magnier and J.P. McManus, the Irish racing magnates who are believed to own a stake of just under 3 per cent.

Any bid could also involve a tie-up with Apax Partners, the British private equity group, which is known to have approached Ladbrokes in 2006 when it was demerged from Hilton Group.

Mr Lewis, who is involved with Betdaq, the betting exchange, has recently been linked to stake-building at Rank Group, the embattled casino and bingo club operator.

Analysts believe that, in the event of a bid for Ladbrokes, he may consider turning his sights on Rank with a view to merging the two companies and creating a gambling conglomerate to rival Gala Coral.

A spokesman for Ladbrokes declined to comment. Shares of Ladbrokes fell 1p to 327.5p, valuing the group at just under £2 billion, or almost £3 billion including debt.

Mr Lewis, who has homes around the world, including a ranch in Argentina where currently resides, was listed sixteenth in The Sunday Times Rich List 2007.

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