The prospect of an imminent flotation for Gala, the gaming group, looked dead in the water today, after its two private equity owners sold part of their stake to rival firm Permira, in a deal that values the casino operator at nearly £2 billion.

Candover and Cinven, the private equity firms who backed a £1.24 billion buyout of Gala two and a half years ago, sold an undisclosed stake to Permira for about £200 million.

However, Candover said this morning that the firm would be a "joint and equal owner" of Gala, suggesting that each will hold a stake of one-third of the group.

Gala is one of Britain's largest gaming operators, with 32 casinos in the UK, Isle of Man and Gibraltar and more than 5 million members at its network of gambling clubs across the nation.

It pays out about £20 million in prize money each week, and is on course to make pre-tax profits of about £155 million this year.

Today's move, which means that Candover and Cinven have already taken out more from Gala than they originally invested, makes a flotation of the gaming group unlikely before 2007 at the earliest.

Having originally invested £550 million in Gala, a return of 1.3 times as disclosed today means the two have realised profits of £717 million.

City pundits had been hoping that Gala might have joined the rush of gaming operators to join the stock market, including the world's largest online poker group, PartyPoker, which floated earlier this year. Shares in PartyPoker have performed strongly since their market debut.

Private equity firms traditionally hold on to their investments for between three and five years before seeking an exit, either through a flotation or a share sale, although that timeframe has been reducing rapidly recently.

Marek Gumienny, managing director of Candover, said: "In the two years since we acquired Gala, the company's organic growth track record, robust cashflows and further expansion into the casino market has delivered strong investment performance.

"This transaction, and a previous refinancing, have allowed us to return more than our initial combined investment to our investors while retaining a majority stake in the business."

Gala was set up by Bass, the leisure group, before a management buyout in 1997 sponsored by CSFB private equity, the venture capital arm of the Swiss-American investment bank.

Candover and Cinven bought Gala from CSFB in March 2003.

Separately, Candover said that it had closed its 2005 fund at €2.3 billion - reaching three-quarters of its target of €3 billion. Most existing investors have re-commited capital to the fund, with Candover itself putting in €400 million.

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