The two bookmakers agreed to a merger in July, creating a Â£2.3bn betting group.
They hope the deal will help to improve their management team and expand their online business.
But Mr Desmond said the "real winners" were Coral Gala's shareholders.
The businessman, who is the majority shareholder in Scottish soccer club Celtic, said in his letter: "Giving away half your company and taking on over Â£800m of debt is a very expensive way to recruit a quality management team."
Mr Dermot has an estimated fortune of  Â£1.05bn according to Forbes and sold the Betdaq betting exchange to Ladbrokes in 2013.
He is urging shareholders to reject the proposed merger at a meeting next Tuesday.
The billionaire wants the bookmakers to hire an independent investment bank to help it "review all strategic options."
In March, Ladbrokes promoted Jim Mullen, the head of digital business, to the chief executive's role reflecting the company's push to increase its number of online customers.
Mr Desmond said shareholders would suffer a 66% reduction in dividends while doing little to improve their digital business.
A spokesman for Mr Desmond said that he had a "substantial shareholding" in Ladbrokes.
Ladbrokes said the businessman appeared to hold at least 1% shares in the company but possibly double that.
In a statement the bookmaker said it was not surprised by Mr Desmond's views, but remained "confident that shareholders see the attraction of the proposed deal."
Irish businessmen Dermot Desmond has written to fellow shareholders in UK bookmaker Ladbrokes urging them to reject a proposed merger with rival Gala Coral calling it a "bad deal".