Mecca Bingo owner Rank Group’s planned £205m acquisition of Gala Coral’s casinos received a setback today when UK business regulator the Office of Fair Trading referred the merger to the Competition Commission for a full investigation.
The OFT said the merger would lead to the land-based casino market in the UK being dominated by just two operators – Rank and Genting – which would reduce competition on both a national level and in nine local areas. “A reduction in competition in the casino sector could result in a worse deal for consumers”, reasoned the OFT today.
Malaysian-owned Genting currently operates 44 bricks ‘n’ mortar casinos in the UK, while Rank’s cash acquisition of 23 casinos owned by Gala Coral, currently one of the three large national casino owner-operators in the UK, would see Rank’s Grosvenor Casinos chain grow to 57 properties following the merger.
While the OFT acknowledged Mecca Bingo owner Rank’s “willingness to resolve the concerns in local areas” by divesting itself of seven casinos, this was not apparently sufficient to address the regulator’s concerns over the competitive impacts of the merger, particularly on a national level.
“The high barriers to entry and expansion in the casino sector mean the loss of competition could potentially be irreversible”, explained Ali Nikpay, the OFT’s senior director, who was the decision maker in the case.
The Competition Commission is due to complete its investigation and deliver its verdict within 24 weeks, but can extend this deadline by a further eight weeks if it considers there are “special reasons” for doing so.
London-listed Rank, which gained shareholder approval for the proposed merger at a general meeting on 26 July, said this afternoon that it was “considering the implications of this decision” and would make a further announcement in due course.