Macau casino revenues rose a less- than-expected 4.5 percent in the third quarter from the year-ago period and were little changed from three months earlier. - Monday 17th of October 2005

LADBROKES, the betting arm of Hilton Group, is understood to be weighing up a bid for Rank Group, the £2.5 billion owner of Mecca Bingo and Grosvenor Casinos, once its proposed demerger from Hilton’s hotel arm is completed.

However, there was strong speculation last night that several leading private equity firms were already preparing to approach Hilton about buying Ladbrokes, which is worth about £3.7 billion and has 2,570 shops in the UK, the Channel Islands, the Irish Republic and Belgium.

The speculation comes after an announcement yesterday that Hilton Group, which owns the rights to the Hilton name outside the United States, is in talks to sell its hotel business to America’s Hilton Hotels Corporation (HHC) for an estimated £3.6 billion.

In a statement, Hilton Group said: “The board confirms that it has received an indicative offer from Hilton Hotels Corporation, which it is currently evaluating. Discussions are ongoing and are subject to the resolution of a number of issues.?

The deal, which would reunify the Hilton brand after a 41-year separation, is expected to take several weeks of due diligence as the two sides work through the complexities of stitching the two businesses back together.

There are fears that a deal may yet founder, while Hilton Group’s bondholders have expressed concern over the security of their position in the event of a deal.

If agreed, the deal would create the world’s biggest hotel company in financial terms, with a combined enterprise value, including debt, of more than £10 billion, and would allow the company founded by Conrad Hilton in 1919 to expand outside its American heartland for the first time since it sold the international rights in 1964.

Shares in Hilton Group jumped by 40¾p to 345½p as the market welcomed the prospect of the return of a significant proportion of the proceeds to shareholders, who would retain ownership of a quoted Ladbrokes.

The recent acquisition of Coral Eurobet by Gala, the casino and bingo operator, has created a gambling behemoth combining betting shops, bingo clubs and casinos, and buying Rank would turn Ladbrokes into a very similar company. Shares in Rank climbed 5¼p to 294p yesterday.

However, several private equity firms were said last night to be preparing to approach Hilton about buying Ladbrokes, with CVC Capital Partners and Charterhouse tipped as contenders.

If Ladbrokes does retain its independence, neither David Michels nor Brian Wallace, respectively chief executive and finance director of Hilton Group, is expected to stay with the company.

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