December 20, 2012

Rank may have to sell for Gala deal to proceed

The Rank Group, whom own the Grosvenor Casinos business could be required to find buyers for a number of casinos, or be prohibited from buying these casinos, before its acquisition of Gala Casinos Limited (Gala) can go ahead, after the Competition Commission (CC) provisionally found that the merger could damage competition in six areas of the UK.

In May 2012, Rank announced a deal to acquire from Gala 23 casinos and three ‘cold’ licences (where the operator holds the right to operate a casino in a particular area but does not currently have an operating casino there). The Office of Fair Trading (OFT) referred the case to the CC in August, and although the deal subsequently lapsed, the parties have confirmed that they are still pursuing the merger. 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.

In its provisional findings published today, the CC has identified five areas where customers could suffer from a substantial lessening of competition (SLC) as a result of Rank taking ownership of previously competing casinos. The five areas are Aberdeen, Liverpool/New Brighton, Stockton-on-Tees, Bristol and Cardiff. In addition the CC has identified an SLC in one area (Edinburgh) where Rank holds a cold licence which would likely be developed into a competing casino in the absence of the merger.

The CC has also found that casinos compete mainly at a local level for customers, particularly on elements such as customer service and promotions.

As well as the provisional findings, the CC has published a notice of possible remedies, which sets out ways in which the CC might address the loss of competition in the areas concerned. The options identified include requiring Rank to find buyers for casinos in the five areas identified-as well as for the Edinburgh cold licence-before being allowed to com-plete the deal. The notice also includes the possibility of the casinos in affected areas being excluded from the transaction or the whole deal being blocked.

Chairman of the Rank/Gala Inquiry Group and CC Deputy Chairman, Professor Martin Cave said:

‘We have found that casinos vary their offer in response to local competitive conditions and while there is limited scope to compete on price, casinos try to attract customers through customer service, promotions, events and the range of games available.

‘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.

‘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.’

The CC is expected to publish its final report by 20 February 2013.

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