Gala-Coral Merger Creates European Giant

England's largest bingo operator has finalized a deal to purchase the country's third largest bookmaker.

Gala is acquiring Coral Eurobet in a £2.18 billion (US$3.8 billion) deal that will create Europe's largest privately-owned gaming company. The merged business will control 1,267 betting shops, 167 bingo clubs, 30 casinos and two dog tracks. It will also have a strong Internet presence.

"Nobody rivals us now because nobody has an integrated company with licensed betting offices, casinos, bingo and online gaming all in one group," Gala CEO Neil Goulden told Reuters on Friday.

Goulden also said the biggest benefits would come through the merging of the two companies' online gambling businesses.

"We are going to combine their Eurobet business with our fledgling interactive business: Internet, television and telephone betting," he said. "If you put those together, plus our 7 million database of customers, you're going to drive significant online revenues."

The deal takes place at a time when England is beginning to implement major changes to its gaming laws as prescribed by the Gambling Act of 2005, and nearly all of the newly formed company's operations will benefit from the changes. The casinos will gain the ability to advertise and to drop a 24-hour waiting period before customers may join, and the bingo halls and betting shops will be able to stay open longer.

Gala is owned by three private equity groups--Candover, Cinven and Permira--which all hold equal stakes in the firm. To finance the purchase of Coral, each stakeholder will increase its investment in Coral by £275 million. Cinven and Candover had been considering a Gala float on the London Stock Exchange, but the plan was canceled in August when Permira entered the ownership group by purchasing a £200 million stake.

Coral was recently recognized as England's largest private company by the Sunday Times and KPMG. The company reported operating profit of £145 million on revenue of £5.4 billion during the year ended September 2004,

Gala is one of several companies expected to bid for the next U.K. National Lottery license.