Further to our article at the start of the month ‘Things are not that Rosy at Gala Bingo’ we were not surprised to read the claims over the weekend that Gala Coral could be broken up in the next few months. It seems that while recent media reports saw the company results and the restructuring program last year as positive we were struggling to see how there would be a ‘happy ever ending’. In fact in fairness we were quite cautious in our comments.

Gala Coral, which owns the 144 club Gala Bingo chain, 26 casino venues, online gaming websites and the Coral bookmaking chain, has clearly become a concern to its new owners. The company released its first trading results since the restructuring program recently which showed another loss of £188m.

The write-down in assets cost the company £123m and a £54m restructuring charge left operating profits at just £105m. Even without these costs the company would have failed to make a profit given the £306m interest payments. The board were no doubt claiming that this was a significant improvement given that the previous year it managed a £495m record loss. The reality is that the new owners are more than likely thinking this was the same situation the former owners found themselves in and somewhat concerned they will be the next set of fools to write off £700 million in a failing gaming company.

Carl Leaver, the new chief executive, is thought to be keen to make his mark but insiders said he had his work cut out as 'the shareholders change their mind on a daily basis and don't agree with each other most of the time'.

The Daily Mail suggests there “have been board-level battles over the company's direction and how shareholders can extract value.”

“The jewel in the crown is the Coral bookmaking chain and the word is that everything else, including the casinos and the bingo division, is up for sale.”

The report also claims the owners are looking to make a quick return on their investment. The reality however is more than likely that they are now trying to avoid making a loss on their investment. With £2.2bn worth of debt and no benefit in running the different gaming operations as a single company the only option is to split the company up. Having investment companies running such a vast gaming operation which has spent the last few years making short-term decisions to meet lending criteria has been suicidal.

One analyst commented: 'Gala has made a great virtue of having the three different divisions, but has never been able to make any great synergies between them, so it's very possible that they could realise more value by splitting up the company.'

It seems that Gala Coral needs to be split into manageable levels and the different operations be sold off to companies that know how to run them and can benefit from synergies from the acquisitions.

Given the recent break-up of Buckingham Bingo and the number of investors that are interested in buying chunks of gaming companies we think it is only a matter of time before both the casino and bingo chains are sold off. Both brands operate as autonomous units currently so splitting them would be a simple process. The casino brand is likely to attract the attention of Rank which is looking to greatly expand its current 55 casino sites over the next two years and owner Ontario Teachers' Pension Plan. Sources suggest that Gala assets are already on their acquisition list.

The newspaper suggests that the break-up process could begin as soon as the outcome on the Tote bookmaking chain is known. Gala Coral is interested in acquiring the state owned group.