Rank, the bingo and casinos group long seen as a possible takeover target, has removed a key obstacle for potential buyers by agreeing a deal to hive off its pension plan.
The company is transferring the pension scheme to the investment bank Goldman Sachs, making GBP 20m in cash and avoiding a further £30m in scheduled contributions to the scheme.
The pension scheme has 20,000 members, reflecting the fact that Rank was once a bigger company. „It was the last significant legacy issue around,“ said finance director Peter Gill. „Rank has slimmed down quite dramatically in the recent past and the pension fund and our obligations towards it still reflected the old Rank.“
Analysts at Merrill Lynch said the deal made Rank a more attractive target by removing risk from its books. The investment bank Jefferies went further and said a „break-up now seems inevitable“.
Rank recently attracted the interest of two Asian firms, Guoco, which has taken its stake to a little over 6%, and Genting, which has a 10% stake. Genting, a Malaysian-based gaming operator, owns Stanley Leisure casinos in the UK. The West Midlands property developer behind the Merry Hill shopping centre, Richardson, has also built a 9.3% stake in Rank in recent months.
„My view is that our job is to put the company in the best possible financial shape for its shareholders,“ Gill said. „This transaction improves the balance sheet and improves the financial position of the company and if that makes it more vulnerable then that’s just a fact of life.“
Rank has been hit by several difficult events – the smoking ban, an increase in casino tax and regulations forcing the removal of high-jackpot slot machines.
Full-year revenues from continuing operations fell 2.8% to GBP 534.4m and operating profits before exceptionals were down from GBP 73.2m to GBP 68.3m. In the first eight weeks of the year, like-for-like revenue at Rank’s Mecca Bingo clubs was 13.5% lower than the same period a year earlier. Revenue at its Grosvenor Casino chain was 13.4% lower.