Gala casts doubt on Apollo, Blackstone offers

The board of Gala Coral has said takeover offers from The Blackstone Group and Apollo Global Management were  “not deliverable”, according to a letter sent to lenders to the group.

Private equity-backed Gala Coral, the UK gambling and leisure giant, is currently working to restructure its £2.6 billion (€2.9 billion; $4.2 billion) debt load. Three rival proposals have been tabled, each of which would see control of the gaming operation wrested from the current financial sponsors: Cinven, Candover and Permira.

A strong hand: Mezz lenders have 'majority board support'

Both Blackstone and Apollo – two large US private equity firms – have made approaches.

According to media reports, Apollo has offered to inject £250 million into Gala Coral in exchange for a 50 percent equity stake. This deal would see the three incumbent private equity owners removed completely from the capital structure, with the remaining half of the equity shared among the junior lenders, said a report in UK newspaper the Telegraph.

Blackstone, meanwhile, has proposed to inject £300 million of into the group, in exchange for 75 percent of the equity.

“Having reviewed these in detail, the board is currently of a view that such offers are not deliverable,” said a source reading from the letter.

A proposal put forward by the mezzanine lenders to Gala Coral, however, has “majority board support”, according to the letter. The lenders – led by Intermediate Capital Group and Park Square – would assume control of up to half of the buyout houses’ equity stakes in the business in exchange for a taking a “haircut” on their debt.

Gala Coral is performing well, according to a statement issued yesterday, which said it is £5.2 million ahead of budget and 3 percent up on 2008. Commenting on the restructuring process, executive chairman Neil Goulden said: “We would expect to make significant progress in the coming weeks and be able to update on progress early in the New Year.”

In related news, Apollo has recently hired Sanjay Patel, former European co-head of private equity and junior debt within Goldman Sachs’ principal investment unit, to be its international head of private equity.