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Rank buys Gala Casinos to become largest operator in the UK 01/05/2012
Richard Whitehouse
Gala sell Casinos to Rank for £205m
Rank adds 23 casinos to its existing 35 casino UK land based portfolio

Gala Rank Casinos
Rank Gala Casinos
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 Malaysia’s Guoco Group, will become the country’s leading casino operator once the deal completes in September, which is needed to pass the approval of the Office of Fair Trading (OFT).

The takeover of the casinos is conditional on approval by Rank’s 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 group’s 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 Coral’s casinos in Dundee and Gibraltar and also the casino freehold properties owned by Gala’s property vehicle. Under Rank’s ownership, Gala’s 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 note, saying:

"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 Guoco."

Gala's 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 non-operating licences.

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 facilities.

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 Rank‘s 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 General Meeting
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