Failed casino sale increases pressure on Gala

The collapse of Gala Coral Group’s casino disposal plan puts more pressure on the company’s turnaround strategy amid weak trading in some divisions and fierce competition across the gaming sector.

The sale of the casino business to Rank Group would have had two advantages. First, it would have helped reduce the complexity of Gala Coral, which has been facing simultaneous challenges at its betting, casino and bingo operations without having significant synergies across them.

Having to maintain the performance of the casino business is likely to reduce the amount of time management can spend on maintaining competitive strength at the Coral betting arm, which has been gradually losing market share to rivals William Hill and Ladbrokes. Second, a sale at around GBP250m – the price widely reported in the media – would have reduced Gala Coral’s mountain of debt.

Rank announced on 30th January it was in discussions with Gala about buying its 24-strong group of casinos, which would have catapulted Rank to market leader, with 14 more casinos than current top dog Genting.

Chief executive Ian Burke said Rank will instead “concentrate on delivering our organic growth plans, including the delivery of 12 more G casinos, by 2015.” Rank’s range of G casinos are larger and flashier than the standard series.

Private equity-owned Gala Coral carries a significant debt burden and has been expected to make a sale since a debt restructuring in 2010 left many creditors with equity.

What next for Gala Coral, it is believed by many than they will have to sell and the casino division is the most likely candidate. There has been industry rumors of a new bidder for Gala Casinos from another company, wether this be Genting or a new player, time will tell.