Apollo, the American private equity firm, is working on an audacious eleventh-hour plan to take over Gala Coral, the bookmaker and bingo club group, through a financial restructuring.

It has submitted a proposal to the board under which it would pay £250m in exchange for 50% of the shares in the company.

The move is the latest twist in the battle for control of Gala, which has debt of about £2.6 billion, and pits Apollo against rival private-equity funds and firms that have lent money to the gaming company.

Rival buyout firm Blackstone is already trying to acquire Gala, which operates some 2,000 betting shops, 148 bingo clubs and 227 casinos. Separately, a group of Gala’s junior lenders has been working for some months on its own proposal to take over the gaming group. This latter plan remains the most likely to succeed, according to insiders.

Apollo is familiar with the problems faced by the world’s largest gaming companies. It is a big shareholder in Harrah’s, the Las Vegas operator behind venues such as Caesars Palace.

Apollo’s Gala proposal would see the £250m repaid to the company’s senior lenders. Junior lenders would be given the remaining 50% of the equity. However, Apollo would have majority voting rights, in effect handing it control, according to sources familiar with the plans.

Apollo’s scheme is unlikely to be well received by existing shareholders, who would receive nothing.

Gala’s main lenders are due to deliver their verdict before Christmas on which restructuring proposal they prefer.

It is hoped that a deal can be wrapped up by the spring.

In common with many other British gaming companies, Gala has been affected by a combination of factors, including the recession and the ban on smoking in public places. Rising taxes have also taken their toll on the sector.

Apollo may use the experience it has gained from its three-year ownership of Harrah’s to help formulate its strategy for Gala.

The recession on the other side of the Atlantic has led to a huge drop in visitors to Las Vegas, America’s gaming capital, and operators there have been offering big incentives to try to attract tourists to play at its thousands of gaming tables.

It has been a similar story in the Far East, where the gaming industry in Macau has been experiencing a downturn in trade as a result of the recession.

In Britain, bingo halls have been hit hardest, but the top end of London’s casino market has also had problems. The number of high-rolling punters still able to afford to drop millions on the turn of a roulette wheel has dwindled to a few dozen.

Fifty, an upmarket casino in St James’s, was recently placed into administration. The venue was a joint venture between London Clubs International, a division of Harrah’s, and Robert Earl, the leisure tycoon behind the Planet Hollywood restaurant chain.


Date Posted: 19-Dec-2009