Rank could reduce its offer for Gala Casinos, even if the Competition Commission approves the deal, due to the six months it could take for the UK’s competition body to review the takeover.
The London-listed operator’s planned £205m buy of 23 of Gala Coral’s casinos was referred by UK business regulator the Office of Fair Trading (OFT) for a full investigation last month on the basis it could result in an “irreversible” loss of competition in the UK’s bricks ‘n’ mortar casino market.
Now Mecca Bingo and Grosvenor Casinos owner Rank is considering either walking away altogether or, even if the offer for Gala Casinos is approved by the Competition Commission, reducing its initial £205m offer because trading in Gala Casinos could worsen in the time it takes for the CC to reach its verdict, according to an “insider” comment leaked to This Is Money yesterday.
“It is certainly not a deal that Rank has to do and if they finally get approval then there is no point in paying the same price for an asset that might have changed considerably since it was last looked at”, said the source.
In referring the merger to the Competition Commission last month, the OFT said the planned 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, which “could result in a worse deal for consumers”.
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 largest 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 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. The initial 24-week period is set to end in February 2013.