Gaming / Gambling Business

1. June 19, 2014 5:59 pm
Gala Coral kicks off
bingo club sale
By Roger Blitz, Leisure Industries Correspondent
©Bloomberg
Gala Coral has called “eyes down” for the sale of its 135 bingo clubs, formally setting
in motion an auction of the gambling division that it hopes will generate bids of up to
£300m.
The private equity-owned gambling group has recruited Lazards to conduct the sale,
banking on chancellor George Osborne’s Budget boost to bingo making the clubs a
more attractive proposition.
Gala has been informally seeking buyers for several months at a price tag of about
£250m, with potential suitors including Henry Jackson’s OpCapita investment
group, financier Hugh Osmond and Luke Johnson’s Risk Capital Partners.
None took the bait, however, sceptical about a segment of the gambling industry that
has been struggling to attract bingo players beyond its core but narrow demographic
base and a punitive tax regime.
But people with knowledge of its plans say chief executive Carl Leaver has dusted
down its sale strategy after the chancellor halved bingo duty, and now believes he can
get a better price through an auction involving trade and private equity buyers.
Lazards’ sales pitch will talk up a business that captures a 38 per cent share of the
market, generating 300,000 visits a week and 1.1m active customers over the past 12
months.
The clubs have generated £16m in earnings before interest, tax, depreciation and
amortisation in the first half.

2. But the group will attempt to convince buyers that full-year ebitda will be in the
region of £50m if other factors such as the growth in the business, bingo duty
reduction and downward movement in rents are taken into account.
It will also sweeten the offer by tempting buyers into a partnership deal with the
online bingo business, which Gala Coral is retaining.
One analyst said a valuation at six times ebitda was a “bit high” for the bingo
business. “The duty cut will benefit the bottom line, but any buyer will have to invest
in the estate,” the analyst said.
Insiders say the bingo division will be retained if bids fail to match expectations. But
Gala Coral’s owners, among them hedge funds Apollo, Cerberus, Park Square and
York Capital Management, who took over following a 2010 debt restructuring, are
seeking an exit.
They have been gradually dismantling the one-time betting, bingo and casino
powerhouse, selling its 19 casinos to rival Rank Group for £179m last year. A
flotation has long been mooted, though an insider said any decision on that was at
least 12 months away.
The group is now focusing on the Coral betting business, whose division is run by
former HBOS chief executive Andy Hornby.
In the quarter to April 12, the betting business increased turnover by 8 per cent to
£302.2m, reporting ebitda of £62.7m.
Gala Coral declined to comment.
roger.blitz@ft.com