Rank could have to sell six casinos in Britain to win clearance for a takeover of a rival operator. This condition was braved as the UK watchdog deeply believes that the takeover would have a negative impact on the competition in six areas, including Bristol and Liverpool.
Back in May, Gaming group Rank Group, which is over 74 percent owned by Malaysia’s Guoco Group, agreed to acquire the casino business of Gala Coral for approximately us$ 331.8 million. The deal, which would add as many as 23 UK casinos and three cold licenses to its chain, was expected to make the UK leading casino operator out of Rank Group.
Even though the initial agreement lapsed in September, two companies are still negotiating the possible takeover. Despite the current level of the negotiations, the Competition Commission decided to express its outlook on the matter as the deal was forwarded by the Office of Fair Trade to the watchdog back in August.
Rank Group, which hires approximately 3,500 workers, concentrates on its format, which lures to its doors younger masses. The company is listed on the London Stock Exchange, however as much as 74.5 percent of its stock is held by Guoco Group which is thought to be the investment tool of Quek Leng Chan.
In its temporary ruling, the UK watchdog underlined that the takeover of Gala casinos as well as three cold licenses could reduce competition in five areas of the UK, namely, in Aberdeen, Bristol, Cardiff, Liverpool, and Stockton-on-Tees. Not to mention that the Competition Commission has also noted that Rank Group, which is the owner of a “cold” license in Edinburgh, might decide to use it in order to build and operate a new competing casino there if the deal is not finalized.
As both companies Rank Group and Gala are two of biggest casino operators in the UK, the finalization of the takeover would mean the emergence of one chain – Rank and Genting, which is expected to be significantly dangerous for the competition in the sector. The watchdog noted that the merged entity would significantly decrease offers for casinos’ clients, thereby reducing competition.
The institution is, however, considering ways to protect competition in the aforementioned areas so that the deal might be finalized by parties. One of possible ways to gain the approval for the Gala takeover is the sale of casinos in the five following areas Aberdeen, Bristol, Cardiff, Liverpool, Stockton-on-Tees. Rank Group would also be required to find a potential buyer for the Edinburgh “cold license” as well. So if Rank Group wants to complete the Gala takeover, it has to find purchasers for those six areas, which are believed to be substantially critical for the competition in the industry.
Other solutions were casinos in affected areas being excluded from the transaction or the whole deal being blocked. "Our concern is that with two of the national players merging, this will leave a number of areas with much reduced competition where casino customers could consequently lose out through a poorer casino offer," said Martin Cave, deputy chairman of the Competition Commission. "We are now going to look at the most effective way to preserve competition in these areas and whether this can be achieved in a way that allows an amended version of the deal to go ahead," he added.
The Commission plans to publish its final report by February 20.