Rank rebuffs move by US rival

Rank rebuffs move by US rival

By Ben Harrington
Last Updated: 11:47pm GMT 24/11/2007

Rank, the embattled casino and bingo operator, has rejected an audacious proposal from Harrah's Entertainment, the owner of the Caesars Palace casino and one of the world's largest gambling companies.

The proposal would have seen the Las Vegas-based company sell a significant portion of London Clubs International (LCI) to Rank in return for a stake of around 28 per cent, according to people familiar with the discussions.

It is not clear why Harrah's made the unusual offer - which is not thought to have included LCI's overseas operations, such as its South African Emerald Casino resort.

The US company, which is in the process of being acquired by Apollo and TPG, the private equity groups, bought LCI only last year for around £300m, its first foray into the newly deregulated British gambling market.

However, the operating environment has since changed after Gordon Brown's new government torpedoed the liberalisation plans set out by his predecessor, Tony Blair.

Leisure groups such as Rank have seen their shares hit in recent months as investors have raised concerns that tougher legislation, in particular the smoking ban, will hit profits. Last week Riva Gaming warned that 100 bingo clubs could close within six months.

In addition, changes introduced by the Gambling Act have already forced Rank, led by chief executive Ian Burke, to remove around 950 gaming terminals from its Mecca Bingo clubs and Grosvenor casinos.

Rank, which has 33 casino operating licences and 12 non-operating licences, issued a profits warning last month that sent its shares crashing to their lowest level in seven years. On Friday the shares closed at 80p, valuing the company at around £315m.

Since the profits warning, analysts have speculated that a predator - such as Harrah's, Genting, the Malaysian gaming group, or a private equity firm - could emerge with a bid for Rank.

Ladbrokes and William Hill have also been cited as potential bidders and analysts have said there would be no competition issues. However, sceptics believe that Rank's debt and a minimal freehold estate mean it is unlikely that a bidder will emerge.

There has certainly been interest from private equity firms in the past. At the beginning of the summer Charterhouse Capital Partners made an approach for Rank, but it was rebuffed by Burke. Two years ago Apollo teamed up with BC Partners and Global Leisure Partners to launch an offer; however, that plan was aborted at the last minute.

None of the parties involved would comment last night.