An investment trust that manages most of the wealth of one of Britain’s richest families will become Britain’s biggest bingo operator in a £241m deal to buy Gala Bingo.
Caledonia Investments has agreed to buy 130 bingo clubs from Gala Coral, the bookmaker preparing to merge with Ladbrokes.
Crucially, the Caledonia deal does not include Gala Coral’s online bingo business, galabingo.com, but the clubs will keep the Gala name and the two businesses will work together.
Gala Bingo has 38% of the UK bingo market with 1.1 million active members and it made a pretax profit of £33m in the year to September, Caledonia said. Gala is the UK’s biggest bingo operator with 15 million visitors a year, employing 4,000 people.
Bingo has staged a surprise revival in recent years, helped by the popularity of the game’s online version and a halving of bingo duty in last year’s budget.
In the past month queues have formed outside clubs up and down the country as customers were enticed to play for free in special sessions. The new owners are confident they can build on the recent up-turn in the appeal for a form of entertainment that until recently looked like being in terminal decline.
Jane Anscombe of Edison Investment Research said the price tag “looks good for Caledonia given the strong cash-flows”.
Simon Longbottom, managing director of Gala’s gaming division, told Euroslot International, a gaming publication: “We were delighted to see queues forming around some of our clubs. Bingo is a great British institution that thrives on community involvement. So to hear the buzz of a full club made customers and staff alike feel overjoyed.”
Caledonia, backed by the Cayzer shipping dynasty, said it was buying Gala Bingo for its steady cashflow and long-term popularity. The current management team, led by the chief executive, Simon Wykes, will stay on.
Duncan Johnson, Caledonia’s head of unquoted investments, said: “Gala Bingo is well known to Caledonia’s unquoted investments team. Its defensive, enduring business model, which delivers strong cash generation and dividend yield, fit ideally with the investment criteria sought by Caledonia.”
Johnson was on the board of Gala Bingo until 2002.
Caledonia was bought by the Scottish Cayzer dynasty in 1951 as a holding company for its shipping interests and is still 48.5% owned by the family, whose wealth is estimated at £620m by the Sunday Times Rich List (£).
The trust has increased its dividend for each of the past 48 years. It donated £75,000 to the Conservative party before the 2010 election but stopped funding the party after other shareholders protested.
Will Wyatt, Caledonia’s chief executive, is a direct descendent of Charles Cayzer, who amassed the family’s fortune in the 19th century. The family’s head, Tory peer Lord Rotherwick, is the brother in law of Mark Carney, governor of the Bank of England.
The trust’s net assets of £1.6bn include investments in private businesses such as loudspeaker maker Bowers & Wilkins and stakes in public companies including AG Barr, the owner of Irn-Bru.
Gala Coral said the deal would pave the way for its merger with Ladbrokes to form Britain’s biggest bookmaker. The bingo business was not part of the merger plan.
There is still a possibility that the competition regulator might block the deal because the combined group would have too dominant a position in the betting shop market. It is possible that the groups might have to sell off a certain number of shops in order to ensure clearance.
Carl Leaver, chief executive of Gala Coral commented: “We are very pleased to have agreed the sale of Gala Retail, following a competitive process. The sale is another transformative step for Gala Coral Group, following the turnaround of the business over the past few years.”
