PE-backed Gala Coral to sell casinos for £205m

The disposal is expected to complete in September 2012. Gala Coral will receive £182.5m in cash upon completion; Rank will pay a further £22.5m into escrow which will be released to Gala Coral in stages between completion and August 2015 on satisfaction of certain conditions relating to taxation, pensions and other contingent liabilities.

The company expects to use the proceeds from the sale to reduce its leverage.

Previous funding
Gala Coral was created in 2005 through a £4bn merger of Coral Eurobet, which was backed by Candover and Cinven, and Gala Group, which was owned by Charterhouse Capital Partners. Candover and Cinven bought Gala Group from Charterhouse in a £2.2bn buyout, with Permira investing £200m in the deal for a 30% stake in the company.

Apollo Management, Cerberus, Park Square and York Capital then made a £200m equity investment in the business in 2010.

The consortium also swapped £558m of debt for equity to become the new owners of Gala Coral, while Candover, Cinven and Permira exited the company. The previous private equity backers were understood to have lost most of their £1.2bn original investment, with Permira writing down £370m, while Candover and Cinven each lost £150m.

Apollo, Cerberus, Park Square and York Capital first invested in Gala Coral as mezzanine backers in January 2010, as the company struggled to refinance about £2.5bn worth of debt. The new £200m infusion was used to pay off senior debt, with the overall restructuring reducing net debt by 26% to £1.9bn and senior debt by 25% to £1.5bn.

Company
The sale of Gala Casinos Limited includes 23 UK-based casinos and three non-operating licences. The transaction excludes the casinos in Dundee and Gibraltar, the non-operating licence for the City of Westminster in London, the divisional and central management functions associated with Gala Casinos Limited, the branded online casino activities and the casino freehold properties owned by Gala Propco Three Limited.

The assets being sold generated a £125.9m turnover and £25.7m EBITDA for the 12 months ending on 7 April 2012.

Advisers
Vendor – Deutsche Bank (M&A).

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