|Gala sell Casinos
to Rank for £205m
Rank adds 23 casinos to its existing 35 casino UK
land based portfolio
Gala & Rank concluded
the deal which includes the sale of 23 UK-based casinos and three
non-operating licences to Rank over the weekend.
Rank, which is
74.5pc-controlled by Malaysias Guoco Group, will become the
countrys leading casino operator once the deal completes in September,
which is needed to pass the approval of the Office of Fair Trading
The takeover of the casinos is conditional on approval by
Ranks shareholders and the receipt of UK merger control clearance.
Gala Coral, which has been through a tough financial restructuring,
said it had not taken a final decision on what to do with cash from the sale,
although it expects to reduce the groups leverage.
This transaction will
crystallise significant value for our shareholders and debt investors,
said Carl Leaver, chief executive of Gala Coral, which is controlled by a
largely private equity shareholder base comprising of 21 different investors.
The deal excludes Gala Corals casinos in Dundee and Gibraltar and
also the casino freehold properties owned by Galas property vehicle.
Under Ranks ownership, Galas former casinos will remain the tenants
of the freehold properties.
Rank has made no secret of its interest in
buying Gala Casinos, but announced on March 29 that earlier talks were off
after it balked at the proposed terms. The talks resumed last week
after the previous discussions broke down over lease agreements, this has now
been overcome and Rank will look forward later this year once the OFT agree to
be the biggest UK Operator ahead of Genting.
Among the mid-caps Rank
rose 6.8p to 123.5p after it confirmed it was buying 23 UK casinos from Gala
Coral for £205m in cash. Jeffrey Harwood at Oriel Securities issued a buy
"This is a sensible
strategic deal for Rank. The transaction should be well received by the market;
the shares look attractive on a single digit PE following the deal, although
there are liquidity issues relating to the 74% interest of
non-operating licence for the City of Westminster (London) and all of the
central management functions previously associated with Gala Casinos are not
included in the scope of the Acquisition.
The creates the largest casino
operator in Great Britain by number of casinos with 58 operating venues and 13
Rank intends to finance the Acquisition along
with its related costs and expenses with new three-year bank facilities
totalling £175 million together with existing bank
Commenting on the transaction, Ian Burke, chairman and chief
executive officer of Rank said:
"We are delighted to
have agreed terms with Gala Coral. This Acquisition will deliver a step change
in Ranks earnings by capitalising on our proven record of operational
excellence in the British casino sector and will be earnings enhancing in the
first full year of ownership. By rolling out the =G Casino format into
the Gala estate and expanding the Grosvenor Casino brand into 11 new cities, we
will accelerate the growing awareness of the brand and support the development
of a multi-channel gaming business."
Rank has received an irrevocable undertaking from its
majority shareholder, Rank Assets Limited (a wholly-owned subsidiary of Guoco
Group Limited), to vote in favour of the resolution to be proposed at the