Private equity groups consider Rank gamble

Rumours of a possible private equity bid of 300p a share have pushed up shares in leisure conglomerate Rank by nearly 7% over the past fortnight to 273p. That leaves them 44% above their year low of 189.5p.

However, one trade buyer linked with the company has dismissed speculation that Rank might receive such an offer, which would value the company at £1.63bn (US$3.22bn).

David Harding, chief executive of leading UK bookmaker William Hill, said: “We are buying back shares in the market at the moment. We couldn’t contemplate a major acquisition.” He added that the recent share price rise might also deter financial buyers from bidding for the company, which operates the Grosvenor chain of casinos as well as Mecca bingo clubs.

“Many venture capitalists have looked at Rank but none can make the sums work,” said Harding. “The trouble is, as soon as the rumours break the shares go up, making it harder for a deal to go through.”

One candidate who could lead a private equity bid for Rank is Tom Singer, who stood down as chief operating officer of William Hill last month saying he was “looking forward to a fresh professional challenge”.

Singer was finance director of William Hill when it was owned by private equity groups CVC and Cinven, before its £835m (US$1.65bn) flotation in 2002. Harding said he was not aware of Singer’s plans in the short term.

Rank hopes to complete the sale soon of its Hard Rock Café chain for roughly US$1bn. Permira, TDR Capital and Apollo Management have all been touted as possible bidders for this division, but US trade buyer Seminole Hard Rock Hotels and Casinos is thought most likely to buy the restaurants business.

This would leave Rank as a pure gaming group, running bingo clubs and casinos, making it more likely that bookmakers such as Ladbrokes might bid for the more focused group.

Peter Taylor, managing partner of Duke Street Capital, which has backed several leisure businesses, said Rank was “an obvious target for private equity but Ladbrokes might also be interested. Buying casinos and bingo would make them a similar group to Gala Coral.”

Other contenders could include 32Red, run by former Ladbrokes International managing director Ed Ware. One report said the private equity arm of an investment bank was also interested.

Rank is due to deliver a trading statement this Thursday, December 7.