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Casino Times
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09 August 2005
Gala To Sell 30% Stake To Rival
After Float Plan Is Dropped
Casino
and bingo operator Gala
is to scrap plans for a stock market flotation, with its
private-equity owners Candover and Cinven in advanced talks
to sell a 30 per cent stake to rival Permira.
The deal would value the
gaming group at about £1.9bn, including
debt.
Gala's two main
shareholders have received a number of bid approaches since
the company appointed Merrill Lynch, Deutsche Bank and UBS
in the spring to advise on a stock market listing. They
concluded that private equity bidders are likely to value
the company more highly than the public markets. Fund
managers are likely to have balked at the high level of debt
the business is still carrying.
An insider said that a
deal with Permira could be announced within a month or
so.
Candover and Cinven have
majority-owned Gala since March 2003, when they backed a
£1.24bn management buyout from CSFB. They plan to sell
equal stakes in Gala and while partly realising their
investment, they would retain a joint stake that would make
them equal shareholders to Permira under the terms of the
deal under discussion.
With 166 bingo clubs
across the country and more than 5 million bingo members,
Gala is Britain's leading bingo operator. It is also one of
Britain's largest casino companies, running 27 casinos
across the UK, the Isle of Man and Gibraltar with more than
1.2 million members.
A flotation was expected
to value Gala at £1.8bn including debt. In January it
said it had paid back half the £550m investment made in
the business by its private-equity backers. It refinanced
its debt and paid back £275m to Cinven and Candover,
leaving it with debts of £945m.
The company posted an 18
per cent increase in sales for 2004.
Bringing in a third
investor will put Gala in a better position to lead the
expected consolidation of the gaming industry in the wake of
the Government's Gambling Act. Bingo and casino players will
no longer have to join clubs 24 hours before they play, and
prize money can be rolled over to create bigger jackpots.
Other measures in the Bill allow casinos to advertise for
the first time.
Under political pressure,
the Government reduced the number of new super
casinos that will
be allowed in the market, reducing the competition that Gala
would have faced from rival gambling outlets.
Gala's chairman John Kelly
has said the Gambling Act is "enormously helpful" to the
company's bingo business, which generates 80 per cent of its
profits. Mr Kelly has led Gala through its first buyout from
Bass by CSFB Private Equity for £236m in 1997 as well
as the buyout by Cinven and Candover two years
ago.
A flotation was expected
to value Gala at £1.8bn including debt. In January it
said it had paid back half the £550m investment made in
the business by its private-equity backers. It refinanced
its debt and paid back £275m to Cinven and Candover,
leaving it with debts of £945m.
The company posted an 18
per cent increase in sales for 2004.
Bringing in a third
investor will put Gala in a better position to lead the
expected consolidation of the gaming industry in the wake of
the Government's Gambling Act. Bingo and casino players will
no longer have to join clubs 24 hours before they play, and
prize money can be rolled over to create bigger jackpots.
Other measures in the Bill allow casinos to advertise for
the first time.
Under political pressure,
the Government reduced the number of new "super casinos"
that will be allowed in the market, reducing the competition
that Gala would have faced from rival gambling
outlets.
Gala's chairman John Kelly
has said the Gambling Act is "enormously helpful" to the
company's bingo business, which generates 80 per cent of its
profits. Mr Kelly has led Gala through its first buyout from
Bass by CSFB Private Equity for £236m in 1997 as well
as the buyout by Cinven and Candover two years
ago.
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Related pages:
Permira
Takes Stake In UK Casino
Operator
PartyGaming
Float Boosts Gala's Listing Plan
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