Rank Group, a takeover bid

As reported on Poker News

UK based gambling group Rank, who own the Grosvenor Casino Chain and Blue Square Poker, have rejected a takeover bid by Hong Kong-based conglomerate Guoco. The offer of 150 pence per share was said to significantly undervalue the operator, who also own Mecca Bingo. The offer was only 0.8 pence above Friday’s closing price, and shareholders were advised to ignore the bid.

Guoco already have a 40.8% shareholding in the company after buying another 11.49% stake, under takeover rules, they had to make the company an offer for the outstanding shares.

The offer values Rank at £586 million, which is a three year high for the company, which had £55.2 million in profit in 2010 – a 17% rise on the previous year.

A Bingo perspective

Many in the internet bingo industry have said that 2011 will be a very active year for the industry. Many experts say that this year the internet bingo industry will see consolidations, mergers and takeovers. Recent news reports seem to confirm this viewpoint. Several bingo operators are in real trouble financially. Recently the imposition of a national smoking ban in Spain caused an immediate drop in attendance at land based bingo games. Rank Group had invested heavily in the Spanish bingo market and since the ban there has been about a 30% drop in bingo hall revenues.

Now the Rank Group is under pressure from Malaysian tycoon Quek Leng Chan and his company, Guoco. Guoco, which is part of the Hong Leong conglomerate, has offered 150 pence a share for the shares it does not already own. Sources close to the company said that takeover bid is not hostile and an unnamed source stated “Guoco supports the Rank management team.” Guoco already owns 29.3% of the Rank Group. After the offer was disclosed Rank shares rose 1.9% to 148.8 pence. Recently Guoco purchased Rank shares from Genting Berhand giving the company a 40.8% stake in the company.

Rank Group is the holding company for bingo giant Mecca. Mecca is one of the most well known bingo brands in the UK. Mecca own the second largest number of land based bingo halls in the UK and also operates a well known internet bingo site. Recently Rank won a multi million pound tax case against the UK government which pushed the company’s shares slightly higher. Rank has an extensive history as a leader in the online gambling sector.

On Sunday, May 8th Reuters reported that Rank Group advised shareholders to reject Guoco’s 150 pence a share takeover saying that the bid undervalues the gaming company. The 150 pence a share takeover offer added a 0.8% premium to Rank’s closing price of 148.8 pence last Friday. The takeover bid values Rank at about 586 million pounds ($960.5 million USD). Rank said in a statement to shareholders “The board has considered the offer and believes that it significantly undervalues Rank and its prospects and, as a result, recommends that shareholders do not accept it.” Guoco was obliged to make the mandatory offer after raising their stake in the Rank Group to 40.8%.

In the business press

SHARES in bingo and gambling group Rank climbed to a three-year high after it rejected a takeover bid from Guoco, a Hong-Kong-based conglomerate run by Malaysian billionaire Quek Leng Chan.

Guoco has offered 150p per share through a mandatory bid after it increased its stake in the UK group to 41% through the purchase of a further 11.49% stake.

That buy took its holding through the 29.9% level where, under takeover rules, it has to make an offer for all of the outstanding shares in Rank. Its offer values Rank at £586m.

In a statement, Rank said it had considered the offer but concluded it “considerably undervalues” the group and its prospects. Guoco also issued a supportive statement, saying Rank has an excellent portfolio of businesses, adding it “looks forward to continuing its existing relationship with Rank’s management”.

Rank’s fortunes have improved markedly over the past year, with its share price recovering from a low of below 100p in July after it won a £150m legal battle with the tax office for overpaid VAT, though this is still subject to appeal.

Profits in 2010 also topped expectations, coming in at £55.2m despite severe disruption from the snow over Christmas. Strong growth at Rank’s 35-strong Grosvenor Casino business, where earnings rose by nearly 17%, was behind the improvement.

The strength of its Grosvenor business has led to Rank often being touted as a possible takeover target. The latest developments prompted a 5% jump in Rank’s shares to around 157p yesterday.

Only 10% of Rank’s shareholders need to accept the offer for Guoco to gain a majority stake and broker Numis suggests that enough shareholders will accept for that to happen.

The broker says that in 2003 Kwek also took control of Thistle Hotels with what its management considered to be an inadequate offer after acquiring a significant minority stake. Rank is still best remembered as the producer of some the UK’s best-loved films such as the Carry On series, but is a shadow of the leisure giant that in the mid-90s ran cinemas, theme parks, pubs, restaurants, nightclubs worldwide and owned brands such as Odeon cinemas and Hard Rock Cafe.

Hard Rock was sold in 2007 to leave Rank solely focused on gaming through casinos, online and in bingo through Mecca in the UK and Top Rank in Spain.

As well as the Thistle Hotel group, Guoco owns the Cumberland Hotel and the exclusive Clermont Club in Mayfair.