Gaming merger promises mezzanine record

Records for European mezzanine could be about to shatter as the deal backing UK gaming group Gala’s £2.18bn takeover of bookmaker and gaming group Coral Eurobet starts to emerge.

The deal has generated a £3bn mandate for Lehman Brothers and RBS, which are set to arrange and bookrun the supporting loan. Although syndication lies two to three weeks off, early indications are that the structure comprises senior, second-lien and mezzanine elements, with the latter in excess of £400m. That would make it the largest mezzanine tranche yet seen in Europe, topping the £400m facility that was structured as part of the AA buyout in 2004.

The inclusion of a large mezzanine tranche is to be expected, as Gala and Eurobet are both known to mezzanine investors. ICG, for one, is rolling its take-and-hold mezzanine positions into the new entity

Candover, Cinven and Permira are the private equity shareholders in Gala. The merger puts an end to Charterhouse-backed Coral’s IPO plans, after that company hired Lazard to advise on options for the business.

The merged entity will have a combined enterprise value of more than £4bn and will employ 17,000 people across its 1,450 outlets. The deal creates the UK’s third largest bookmaker with 1,670 sites, and its largest bingo operator with 167 clubs.

Both companies are fresh from the loan market. Coral Eurobet’s most recent foray was its £1.045bn recapitalisation, arranged by Bank of Scotland and Lehman Brothers in March. Gala has just completed a £1.1bn refinancing and equity swap that backed Permira’s acquisition of a 30% stake in the business. Lehman Brothers and RBS also provided that loan.