Rank purchase of Gala Casinos delayed

The purchase of Gala Casinos by the Rank Group has hit a delay as The Office of Fair Trading has referred the acquisition to the Competition Commission for further investigation. It was believed that the OFT would rubber stamp the deal and the purchase could go ahead in the 4th Quarter of the year.

However the OFT says due to its concerns that the merger will substantially reduce competition in the casino sector it has now referred the deal to the Competitions Commission which is expected to report back in early February.

The OFT’s investigation found that Rank and Gala are two of the three large national casino operators in the UK.

Following the merger, there would be only two large national casino operators, Rank and Genting.

The OFT is concerned that the merger would reduce competition both at a national level and in nine local areas.

A reduction in competition in the casino sector could result in a worse deal for consumers.

Additionally, the OFT found that there are high barriers to entry and expansion in the casino sector due, among other things, to the licensing regime, which would severely limit the ability of third parties to enter or expand to replace the loss of competition caused by the merger.

Given the realistic prospect of this merger resulting in a substantial lessening of competition, the OFT considers it appropriate to refer the merger to the Competition Commission for an in-depth review.

Rank offered to provide undertakings in lieu of reference to the Competition Commission, including the divestment of casinos in a number of local areas.

The OFT welcomes the parties’ willingness to resolve the concerns in local areas, however, the undertakings were not considered sufficiently clear-cut to address all of the concerns raised by this merger.

OFT senior director, and decision maker in this case, Ali Nikpay, said: “Rank and Gala are two of only three large national casino operators in the UK.

“This merger would represent a major consolidation which could be expected to reduce competition, both locally and nationally. 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.”

Rank is considering the implications of the Office of Fair Trading’s decision to refer the company’s proposed acquisition of Gala Casinos to the Competition Commission, Rank says a further announcement will be made in due course regarding the decision.