Gala's £2bn deal to create gaming giant

Gala, the bingo and casino group, is today expected to announce a £2bn takeover of the betting shop chain, Coral Eurobet, in a deal that will see the creation of one of Europe's biggest gaming businesses.

The prospect of a counter-bid from the venture capital business, CVC Capital, was fading last night as teams of advisers for Permira, Cinven and Candover, owners of Gala, and for Charterhouse, owners of Coral, worked to secure the deal. Last-minute tweaking could postpone the agreement to the weekend.

CVC is understood to have bowed out of the bidding for Coral, the UK's third-biggest bookmaker with 1,260 betting shops, leaving the path open for Gala to complete the takeover. Together, Gala and Coral would be worth about £4bn.

The management of Coral is set to pocket about £128m from the takeover. About 60 people will share the windfall, although it is thought that Vaughn Ashdown, the chief executive of the business, will enjoy the biggest chunk. He is expected to rake in about £40m from his stake.

Mr Ashdown, 48, led the £860m buyout of Coral in 2002 from Morgan Grenfell. He is thought to have made £50m from his stake in Coral, and Charterhouse, which backed the management team, is thought to have withdrawn an estimated £560m from the business through various refinancing arrangements.

Mr Ashdown and Mick Mariscotti, Coral's finance director, are expected to stay on at the enlarged business for now to oversee the integration process.

Charterhouse will realise a complete exit from the takeover, and enjoy a hefty return on its original investment. Coral has flourished in recent years, thanks to changes in the tax system that have made punting more attractive, and money-spinning fixed-odds betting terminals in betting shops.

For Gala, the deal will dramatically expand its gaming activities. It operates 116 bingo halls and 32 casinos, and hopes to benefit from new gambling laws that came in to effect this month. Customers no longer have to join a casino 24 hours before they play and bingo prizes can now be rolled over to create bigger jackpots. Gala hopes to exploit Coral's brand in the betting market, drawing customers across to its bingo halls and casinos.

A float of the combined business is anticipated within about two years of the takeover. Neil Goulden, Gala's chief executive, is expected to take on the same role in the combined business.

The takeover follows the shelving of flotation plans by Gala and Coral. Gala had been gearing up to float by the end of the year, but instead struck a new refinancing deal that saw it sell a 30 per cent stake to Permira.

Coral's ambitions to challenge William Hill and Ladbrokes as the top betting chain in the UK were dashed when the company lost out in the bidding for Stanley Leisure's retail estate. William Hill paid £550m for Stanley's shops, making it the largest betting operator. Since then, Coral has also been pursuing an IPO, hiring Lehman Brothers to work on a float. This triggered the interest of Gala, whose chairman John Kelly bought the bingo operator in 1997 for £297m.