Hard Rock sold off cheap, say analysts
Investors and analysts gave a cool reception to the £490 million sale of the Hard Rock Cafe chain by Rank Group yesterday, describing the price tag as “modestly disappointing�.
Rank said the sale of the rock-themed chain to the Native American Seminole tribe, which operates two Hard Rock hotel and casino resorts in Florida, would allow it to open up its casino market.
Seminole Hard Rock Hotels and Casinos, which has resorts on its reservations in Hollywood and Tampa, said it would continue to build Hard Rock casino-hotels. It saw off competition from private equity groups, including Permira, TDR Capital and Apollo Management, to clinch the deal.
Shares in Rank dropped nearly 5 per cent to 254¾p last night as investors digested the news. Analysts were also unconvinced, with Merrill Lynch saying the disposal price was below its estimated £525 million valuation. The broker retained its “sell� recommendation.
Mark Reed, at Teather & Greenwood, said a higher price was expected, on account of “huge brand recognition�.
News of a 15 per cent slide in revenues at Rank’s Scottish bingo operations last year, hit by the smoking ban, also contributed to the share fall. Rank said admissions at Mecca Bingo in Scotland had fallen 6 per cent and spend per head by 9 per cent. In the second half, total revenue from the bingo halls was down 2 per cent, despite it growing market share, up 3 per cent to 34 per cent.
Rank, which has shed household names such as Butlins, Odeon and Pinewood to focus on gaming, said revenue growth had slowed at its Grosvenor Casinos to 4 per cent in the second half from 9 per cent in the first half.
2006-12-12
