Rank Numbers Up-Talks With Gala Continue

The ongoing talks between British gaming giants Rank and Gala have attracted the attention of the live and online gambling industry. The sale would allow Rank to add 24 Gala casinos to Ranks 35-strong Grosvenor Casinos. Although the talks have been underway for some time no deal is imminent according to insiders. Last month Gala revealed that the company is burdened by debts of £1.3 billion pounds. A breakup of Gala Coral has been expected ever since the company became involved in a complicated debt restructuring in 2010. Gala will focus on the company’s bingo and bookmaking operations. Gala also has a large online bingo operation.
Industry observers have long considered Rank as the most likely candidate to purchase Gala’s operations. Last year Rank was forced to put its acquisition plans on hold when the company was purchased by its biggest stockholder; Malaysia based Guoco. Guoco is the investment arm of Malaysian billionaire investor Quek Leng Chan. Currently Guoco owns about 75% of all Rank shares. The purchase of Gala’s casino operations will speed up the plan of Rank Chairman Ian Burke to operate 45 casinos by 2015.

Rank is in a very good financial position. Rank just reported an 8% increase in the company’s first half pretax profits. Rank has conducted a marketing campaign designed to attract younger, less formal players.  Rank chairman Ian Burke stated “We have attracted significantly more customers under 35 and more women.” Currently Rank operates 35 casinos and 103 Mecca bingo halls throughout Britain. Mecca also has a popular internet bingo site that was launched to make up for losses caused by the imposition of a national smoking ban. Rank has tried to appeal to a wider audience after the company was hit by reduced consumer spending and the imposition of smoking bans in the UK and Spain.

Apparently the marketing strategy was successful. Rank reported that player numbers at Mecca Bingo halls increased by 60,000 for a total of 770,000 players. Grosvenor Casinos attracted 762,000 players, an increase of 61,000. The rise in revenues and player numbers helped to offset the damage to Rank’s Spanish operations caused by a recent national smoking ban. High unemployment in Spain has also put pressure on Ranks operations in the country. Burke indicated that the economic outlook in Spain is a cause for concern. Burke told reporters from Reuters “We are not assuming that Spain will come out of the euro. The more immediate risk is the state of the Spanish economy. With unemployment at over 20 percent, it faces an even tougher environment than the UK does.” Stock analysts have a very positive view of Rank’s future performance. Peel Hunt analyst Nick Batram rated Rank stock as a ‘buy’ and said “Over the next 12 months the group will either succeed in acquiring Gala Casinos, or indicate its position on repaying excess capital back to shareholders. Either outcome should be positive for the share price.”