Harrah’s Entertainment, the American firm which owns London Clubs International (LCI), is believed to be in talks with betting and gaming operator the Gala Coral Group, to merge LCI with Gala Casinos.

Meanwhile Genting, the Malaysian firm that owns Stanley Casinos, has increased its share in bingo and casino operator, the Rank Group.  It has increased its share from 10 percent to 11.03 percent and this has again sparked rumours that they may make a bid for the Rank Group.

If LCI and Gala Casinos were to merge, it would have 40 casinos across the UK, just one less than Stanley and eight more than Rank’s Grosvenor Casinos. 

This latest move by Harrah’s Entertainment follows on from three months ago when Harrah’s made a similar approach to Rank with the idea of swapping its LCI business in exchange for a 28 percent stake in the Rank Group.  Rank’s chief executive, Ian Burke was reported as being strongly against this move.

Analysts said it wasn’t clear whether the discussions between Harrah’s and Gala Coral involved a similar assets-for-equity swap, or a sale of LCI.  Neither company has commented upon the discussions so far, but a source close to Gala Coral said several deals are discussed throughout the course of the year and most amount to nothing.

Harrah’s Entertainment bought LCI in 2006 for £300 million, which the group saw as a starting point to enter the British gaming market.  These plans have been dented by the British Government which has made a u-turn on deregulation, introduced the smoking ban and made a big increase in gaming tax.

The group are the owners of Caesar’s Palace in Las Vegas and recently were taken private by Apollo Management and TPG in a deal worth $27.8 billion.  Analysts reckon the private equity firms have decided to scupper Harrah’s expansion into the European market, as the credit crunch has meant that its bankers can’t syndicate the debt funding. 

Harrah’s Entertainment has been looking into opening supercasinos across Europe, including projects in Spain, Slovakia and Hungary.  There has been slow progress about these projects and analysts are in doubt as to whether Harrah’s would commit to such projects which could take years.

There are ten LCI casinos in the UK, with five of them in the capital.  The London clubs include Rendezvous, 50 StJames and the Casino at the Empire, in Leicester Square.  Recently opened casinos in Glasgow and Nottingham look to be followed by a new casino in Leeds.

Harrah’s has invested big in LCI since its takeover in 2006, but the slump in the UK casino industry could mean it struggles to recoup its investment in the event of a sale.  LCI’s clubs, however, are on a smaller scale to the resorts which Harrah’s own in other locations across the world. 

Rank has seen its share prices falling sharply in recent months.  This has led to several potential suitors to take stakes in the business.  Recently, the Guoco Group raised its share in Rank from 5.05 percent to 6.05 percent, in addition to Genting also raising its stake.