Caledonia Investments Buys Gala Bingo Clubs for £241 Million
London-based Caledonia Investments PLC announced last Monday that the Gala Coral Group has agreed to sell Gala Bingo Holdings to the investment trust company in exchange for a £241 million settlement price. The acquisition deal covers Gala Bingo’s 130 clubs only, as the Gala Bingo dotcom site is not part of the trade.
Finalisation of the bingo sale requires the approval of the UK Gambling Commission, which Gala Coral expects to secure within two months if all things go smoothly as planned. Accordingly, completion could come ahead of the Ladbrokes-Gala Coral £2.3 billion merger, as the deal is part of preparations for the forthcoming consolidation between the two UK betting giants. As the combined betting group would be establishing a dominant position in UK’s gambling market, there are those who opine that the group could be required to sell some of their retail outlets as condition to securing a clearance.
Nonetheless, the CEO of Gala Coral, Carl Leaver expressed pleasure over the acquisition agreement pertaining to the Gala Retail sale. CEO Leaver considers the step as another transformative move for the Gala Coral Group, comprised by several private equity companies that include Cerberus Capital Management and Apollo Management.
The Caledonia takeover is expected to help Gala Bingo continue in building further its retail bingo estates and in continuously enhancing its bingo products with digital technologies. The advent of online bingo facilities and UK’s recent reduction of bingo duty from the previous 20 percent (20%) down to ten percent (10%), have contributed greatly to the revival of bingo entertainment as a potentially lucrative business investment.
Duncan Johnson, a former Gala Coral board member and now head of Caledonia’s unquoted investments sector, made the announcement. His statement conveyed Caledonia’s satisfaction in having acquired a market leader, which he describes as a very defensive business but with very robust cash flow. After all, the Gala Bingo clubs have cornered 38 percent (38%) of Great Britain’s bingo market, having 1.1 million customers continuously and actively playing at the popular land-based bingo venues over the past years.
According to the Caledonia announcement, the bingo clubs have already poured in £52.7 million in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as of September this year. That being the case, the CEO of Gala Bingo Holdings, Simon Wykes will be staying on as head of the team managing the bingo club operations.
Duncan Johnson mentioned that Caledonia’s unquoted investment team is quite familiar with Gala Bingo’s enduring business model, and capability to generate strong cash inflow leading to dividend yields. According to Mr. Johnson, such capabilities match perfectly Caledonia’s investment criteria, as unquoted investments represent both majority and minority investment holdings on securities not listed in the exchange market.
Financial reports reveal that around £600 million of Caledonia’s £1.6 billion net assets are in the form of unquoted investments. Moreover, Caledonia, an investment trust company managing the funds of most of Britain’s wealthiest families, has an established reputation for its unwavering increase of annual dividends over the past 48 years of its operations.
A company originally founded as Foreign Railways Investment Trust Limited in 1928, it evolved into becoming Caledonia Investments Limited when Scotland’s Cayzer shipping family acquired it in 1951. Members of the Cayzer clan still collectively hold 48.5% of the investment trust company, despite having gone public in 1960 by listing the company in the London Stock Exchange as Caledonia Investments PLC.
