Completed acquisition by Danopra Limited of certain assets of Inspired Gaming Group plc

Affected market: The supply of gaming and amusement machines

No. ME/3766/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party comments, assessment and decision.

The OFT's decision on reference under section 22(1) given on 9 September 2008. Full text of decision published 18 September 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

Danoptra Holdings Limited is the holding company for the Danoptra Group's activities in the gaming sector. Its wholly owned subsidiary, RLMS Acquisitions Limited, is a new company set up for the purposes of acquiring the assets of IGG the subject of this merger. Danoptra Limited (Danoptra) is the parent company of Gamestec Leisure Limited (Gamestec) and Bell Fruit Games Limited (Bell). 

Gamestec is active in the operation and rental of amusement and gaming machines in the UK. Gamestec supplies amusement and gaming machines to customers across a range of sectors including the pub, motorway services and bingo sectors, while Bell is active in the manufacture and design of amusement and gaming machines.

Inspired Gaming Group plc (IGG) develops and supplies gaming and amusement machines and server based gaming technology. Its customer base includes pubs and bars, casinos, licensed betting offices, bingo halls, holiday parks and out of home leisure venues. The assets Danoptra acquired from IGG related to IGG's gaming activities only in the pub sector which represents [less than 50 per cent] of all IGG's machines' business. The UK turnover generated by the assets acquired by Danoptra for the year ending 30 September 2007 was [less than £70 million].

TRANSACTION

The assets acquired by Danoptra ('Acquired Assets') include:

• approximately 25,000 gaming and amusement machines located on customers' premises
• some 800 employees
• leases for some 630 cars and vans, and
• the benefit of certain supply contracts for the continuing operation of the business of the Acquired Assets.

The Acquired Assets include a mix of traditional gaming machines and digital gaming machines, which permit gaming content to be supplied and managed remotely.

Danoptra Holdings Limited completed the acquisition of the Acquired Assets on 7 July 2008. The Statutory deadline expires on 6 November 2008. Danoptra notified the transaction on 16 July and the administrative deadline for a decision expires on 11 September 2008.

JURISDICTION

As a result of this transaction Danoptra and the Acquired Assets - which the OFT considers to form an 'enterprise' for the purposes of section 23 of the Enterprise Act 2002 (the Act) - have ceased to be distinct. Danoptra overlaps with the Acquired Assets in the operation and rental of gaming and amusement machines to the UK pub sector creating a share of approximately [35-40] per cent, the share of supply test in section 23 of the Act is therefore met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

Background

The OFT previously considered this market in 2004 when it considered the anticipated acquisition by Gamestec Leisure Limited of Rank Leisure Machine Services Limited.  The European Commission also considered the market in its decision on the Candover/Cinven/Gala merger in 2003.

THIRD PARTY COMMENTS

Third parties comments have been discussed above. All third party customers who responded to our enquiries were unconcerned by the merger, citing the presence of a number of alternative suppliers.

ASSESSMENT

Danoptra and the Acquired Assets overlapped in the supply of gaming and amusement machines to the pub sector.

In line with its earlier decision in the Gamestec / Rank case , the OFT has concluded that the relevant frame of reference should be the supply of all types of amusement and gaming machines to all retail customer sectors in the UK. In this frame of reference the merged entity has an estimated market share of [15-20] per cent, increment [5-10] per cent.

Danoptra will continue to face competition from IGG  and there are a number of alternative suppliers to the market. Third party customers identified between seven and 47 alternative suppliers and buyer power amongst the large national players appears reasonably strong.

In the light of the above evidence of the number of alternative suppliers, and retail customers' willingness and ease of switching the OFT believes that the acquisition of IGG's pub sector gaming machines does not create a realistic prospect of a substantial lessening of competition.
 
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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