Rank terminates talks with Gala Coral after failing to agree a price acceptable to its shareholders
Bingo and casino operator Rank has pulled out of talks to buy the casino operations of Gala Coral, a £250m deal that would have transformed the business into the UK's biggest casino operator.
But after two months of discussions, Rank has terminated the discussions after failing to agree a price that would have been acceptable to its shareholders.
Adding the 24 casinos owned by debt-laden Gala Coral to the 35 already run by Rank, largely through its Grosvenor arm, would have seen Rank leapfrog market leader Genting, the Malaysian group that owns 45 casinos.
Rank intends to push on with its own expansion plans to open 15 "G" or larger style casinos by 2015.
James Hollins, analyst at Investec, described the decision as a "minor disappointment" but said Rank was "right to walk away".
"The announcement of these talks was made on 30 January 2012 and we had projected completion of the deal at a sensible price given Gala Coral's desire to raise funds for paying down its material gross debt of £2.1bn at September 2011," Hollins said.
Private equity owned Gala Coral also blamed the price for the breakdown in talks, sparked after an approach from Rank rather than because it had put the business up for sale. "Our casino business was not for sale when Rank made an unsolicited approach. Now that it is clear that a transaction on terms acceptable to our shareholders cannot be concluded, we are very happy to continue to drive growth from our casinos which are performing very strongly," Gala Coral said.
"These discussions have now ended after the parties failed to reach an agreement that was in the best interests of our shareholders," Gala Coral added.
Ian Burke, Rank's chairman and chief executive, said it was "committed to delivering sustainable growth in shareholder value; the proposed terms of the potential acquisition did not achieve this objective".
"We will now concentrate on delivering our organic growth plans, including the delivery of 12 more G casinos by 2015," Burke said.
Rank, 74.5%-owned by Malaysia's Guoco, has 35 casinos and 103 bingo halls in Britain.
Gala Coral was spun out of Bass in 1997 and has had a number of private equity owners since then. Its main shareholders are Apollo, Cerberus, Park Square and York Capital Management, which bought out Candover, Cinven and Permira in 2010.
Gala Coral will now press on with the relaunch of the website and refurbishment of some casinos.
One of the most senior executives at Gala Coral is Andy Hornby, the chief executive of HBOS when it was rescued by Lloyds Banking Group during the 2008 banking crisis.
Hornby's role has been to revive the bookmaking arm Coral, which he joined after leaving the pharmacy business Alliance Boots, his first employer after he left HBOS.