Rocky times in the U.K.
The adverse climate in which the gaming industry must operate in the U.K. is hitting operators on all levels. Companies like Gala Coral and Rank, which have operations in several gaming categories, are feeling it in all areas.
The smoking ban and the loss of slot machines have devastated bingo club and betting shop results. New casino regulations have introduced unexpected, higher taxes on gaming revenue. Add in the consumer credit situation and the overall effect has been one of less money coming in and more going out-not a good thing.
Casino and bingo operator Rank had been the subject of takeover rumors for several months when the U.K. media reported that the company was approached by Genting Berhad with a takeover offer valued at about £485 million, around $960 million. Genting, which has a subsidiary that owns Stanley Casinos in the U.K., had built its stake in Rank to about 11 percent in recent months. The stock price jumped over 10 percent on the news. But a day later, a Reuters report quoted an unidentified source saying that Genting had not in fact made a bid and was unlikely to do so. Rank stock then lost its recent gains.
At Gala Coral the problems were of a different nature, although they had the same source. The Telegraph reported that as numbers had worsened over the past months, management realized the company could run into danger regarding certain banking agreements. To ward off the danger, the private equity owners of Gala Coral agreed with its creditors to pump £125 million into the business. The cash will be used to pay down £83 million of senior debt, with the rest of the infusion going onto the Gala Coral balance sheet.
On top of their individual troubles, the two operators are now battling each other over rights to the letter “G.”
Rank, which owns the Grosvenor casino group, recently began branding its newer, entertainment-based casinos as “G Casinos.” But now, as the company is thought to be trying to register the “G” logo, Gala says that it had already registered the “G” for its brand. How the situation will play out is anybody’s guess. However, it would appear the two have more pressing problems.
