Gala Coral chief warns potential buyers of industry woes Private equity groups looking at buying Gala Bingo have been warned off the bingo industry by an unlikely source - the company's managing director. Simon Wykes said investors should steer clear of the sector "unless [they] had a huge amount of capital and didn't mind paying over the top." The comments come as Gala Coral, the company that owns Gala Bingo, looks at potentially disposing of its struggling bingo division in a deal that could fetch as much as £250m. A number of private equity groups have looked at the company, which had earnings before interest, tax, depreciation and amortisation of £78m last year, but has suffered from a drop in visits as its low-income audience cut back on spending. Gala Coral is considering a potential initial public offering some time next year, according to people with knowledge of the matter. The company was taken over by distressed asset groups in 2010, after the gambling group collapsed under its £2.5bn net debt. Along with main rival Mecca, which is owned by gambling group Rank, Gala has also been hit by an ageing customer base and an unfavourable tax regime. Bingo suffers from a stricter tax regime than other businesses in the leisure sector. Unlike venues such as pubs, bingo halls cannot recover value added tax on infrastructure, making investing in venues much more expensive. "We need to attract new customers - and so we need to invest in facilities," said Mr Wykes. But the real challenge is the level of VAT that we have to pay. It makes investment impossible. Investors looking at investing in the leisure sector - parts of which, such as restaurants, have been remarkably robust during the downturn - would find it "easier to get a return elsewhere in the leisure industry because of the VAT issue," said Mr Wykes. The level of irrecoverable VAT paid by Gala has risen from about £500,000 a few years ago to almost £20m today. Mr Wykes predicted that between 120 and 150 of Britain's 500 bingo halls faced closure unless the industry's tax burden were lifted. "Those will go and we will end up with a much smaller industry," said Mr Wykes. Unlike [collapsed retailer] Comet, it's not like all the money will go elsewhere. People will just stop going and start doing something else.