Genting to take over UK’s Rank? - Friday 25th of April 2008

Speculation that Genting Bhd is looking to take over Rank Group Plc remains rife as the UK’s second largest bingo and casino operator continues with its share price uptrend.

Rank’s stock moved up to 99.25 pence at the time of writing yesterday, more than 12.5% up its Monday’s close of 88.25 pence.

Industry observers believed that one reason why the Genting group could be looking to acquire more of Rank shares is to protect its investments in the company following the emergence of the Hong Leong group in the UK company. The Hong Leong group has been increasing its stake in Rank since the beginning of the year. It has 9% stake in Rank as at March 25 compared to 6% in February.

Rank’s fortunes slumped when an indoor smoking ban on casinos and gaming outlets was enforced last year. The stock slid to its 52-week low of 77.75 pence last November, making it a takeover target.

Bloomberg had reported on Tuesday that Rank has been approached by the Genting Group for a take-over bid with a proposed price of 124 pence per share. The Genting Group through Genting International Ltd (“GIL”), currently owns an 11% stake in Rank Group.

The reported take-over price of 124 pence per share is about 28% premium above the closing price of 97 pence on Tuesday. According to AmResearch, this values Rank Group at 25 times FY2008F consensus earnings per share (EPS) of 4.9 pence and 22 times FY2009F consensus EPS of 5.6 pence.

AmResearch estimated that it would cost the group approximately £431 million (RM 2.72 billion) to acquire the remaining stake it does not own in Rank Group.

“GIL’s net cash stood at S$1.8 billion (RM4.16 billion ) as at end-December 2007. However, most of these would have already been drawn down for the construction of Resorts World at Sentosa. We believe that GIL would have to rely on external funds to finance the take-over of Rank Group,” said AmResearch in an April 2 note.

Apart from bingo, Rank also has online gaming operations. Rank’s stable of casinos includes the Grosvenor Casinos and Blue Square. Grosvenor Casinos is a UK-based chain of over 30 casinos across the UK. It also has two sister casinos in Belgium.

Blue Square on the other hand, is the largest interactive betting services in the UK.

Whether the deal pans out or not, it looks like the Genting group is enlarging its footprint in the UK. It already has over 40 casinos in the UK under Stanley Leisure group.

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