Mecca, Gala Deal Referred to the Competition Commission

The merger of two of the UK’s largest casino and bingo operators suffered a setback after the merger was referred for a competition inquiry. The Rank Group, operator of Mecca bingo, plans a £205 million purchase of 23 Gala Coral sites. The move will put Rank ahead of Malaysian gaming firm Genting as the UK’s largest gambling operator. The merger will give Rank’s casino sector 57 sites. The Office of Fair Trading (OFT) has expressed concerns that the merger will reduce competition on a national level and in nine local areas. The Office of Fair Trading has sent the merger to the Competition Commission for further evaluation despite Rank’s offer to divest itself of seven casino locations.

The Office of Fair Trading said that a reduction in competition to just two national operators may not be a good deal for consumers. The OFT said that there were high barriers to entry and expansion in the casino sector and could limit the ability of other operators to replace the loss of competition. Ali Nikpay, the senior director at OFT, said “Rank and Gala are two of only three large national casino operators in the UK. The high barriers to entry and expansion in the casino sector mean the loss of competition could potentially be irreversible. As such, we believe it is appropriate that the Competition Commission reviews this merger in detail to ensure that the interests of consumers are protected.”

The Competition Commission will report by February 3rd 2013 and has the power to block the merger. Rank Group said that it hoped to complete the deal by September. Most of Rank’s casinos are outside of the London area and the company has been focused on its G-Casino brand. The G-Casino format is designed to attract younger less formal players. Currently Rank employs more than 3,500 people. The merger will allow Rank to expand into 11 new cities and will allow Gala Coral to focus on the company’s bingo and bookmaking operations. Rank is listed on the London stock exchange but is majority owned by Guoco, the investment arm of Malaysian billionaire Quek Leng Chan.

Rank has over 100 bingo clubs and owns the Bluesq sports betting and gaming business. Rank has agreed to pay £182.5 million for the Gala casinos and the rest will be paid in stages until 2015.

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