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 tosell 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 likelyto 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 Galasince March 2003, when they backed a £1.24bn management buyout from CSFB. They plan to sellequal 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 casinosto 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 casinosto 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.
