Bid war on the cards as sector giants stalk First Leisure

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The Independent Online
Predators are believed to be circling First Leisure, the bingo to nightclubs group run by Michael Grade, former head of Channel 4. But Mr Grade is thought to be keen to maintain First Leisure's independence, having only just taken over the group, which was founded by his uncle, Lord Delfont.

Speculation is mounting that Bass, the brewing and leisure group, is considering a pounds 630m takeover bid, a substantial premium to First Leisure's market capitalisation of just pounds 509m. City observers believe Rank, the Hard Rock Cafe to bingo group, is also interested in First Leisure and may join a bidding war for First Leisure if Bass makes a formal approach.

However, First Leisure has indicated bidders would have to offer a much higher price than pounds 650m to stand any chance of success. "A pounds 650m bid would get short thrift from First Leisure. It would mean a short-term gain for shareholders but Michael Grade has plans to make this a much bigger company," a spokesman said yesterday.

Nevertheless, now would be a good time for predators to strike as First Leisure's shares have slumped from a 376p high earlier this year to 311p and have significantly underperformed the market and the leisure sector over the past 12 months.

Research published this year by leisure analysts at NatWest Securities suggested First Leisure would be an attractive bid target for Bass and other large international leisure groups.

First Leisure recently announced a fall in profits for the half year to April from pounds 18.1m to pounds 17.2m. But Mr Grade is keen to prove he can turn around the group which owns a diverse set of leisure attractions from the Blackpool Tower to Brannigans music bars.

He has already announced a wide-ranging shake-up of the troubled bingo division by installing new management from Rank. He is also looking to expand its health and fitness division following the acquisition of the Riverside chain of clubs.

Bass declined to comment on the market speculation but is thought to be keen to pull off an acquisition after the Government blocked its bid for Carlsberg-Tetley, which would have made it the UK's largest brewer. It is also still in the running to buy bookmaker William Hill from Brent Walker. Analysts believe the bookie could fetch more than pounds 650m. Bass has reached the final bid stages but is facing stiff competition from CinVen, the venture capitalist.

If Bass is unsuccessful in acquiring either business it is likely to concentrate on its international operations. It plans to expand its Chinese brewing interests and is thought ready to take its themed-bar chains such as All Bar One to continental Europe.

Mr Grade is currently looking at ways to expand First Leisure's leisure interests. "We will consider anything. I want to make this company more innovative and to encourage people to come to me with new ideas," he said at the time of the interim results announcement.