Hilton may shed bookies

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The Independent Online
HILTON, the leisure group previously known as Ladbroke, is coming under increasing pressure to get out of bookmaking.

The move would be a logical step for a company that has become increasingly focused on its hotels and casinos since its pounds 1.2bn acquisition of Stakis in March. This change of emphasis was reflected in the decision to ditch the Ladbroke name, which ended the company's 110-year association with the eponymous Warwickshire village.

Analysts are sceptical about the potential synergies between Hilton's casino and bookmaking arms. Speculation was also raised by Hilton's decision not to replace Mike Smith, its former head of betting and gaming, when he left in March to become chief executive of Rank. However, Hilton has so far remained adamant that it still has a future in track betting.

Any decision may be influenced by Japanese bank Nomura's recent experience when it attempted to float the William Hill chain it bought from Bass. The float, last March, failed to attract sufficient institutional interest, and Guy Hands, Nomura's head of Principal Finance, decided instead to sell William Hill to a pair of venture capitalists. The pounds 825m that Cinven and CVC agreed to pay for the chain was at least pounds 45m more than the flotation would have raised. Nomura's experience suggests that Hilton's share price would benefit from the disposal of its betting division. Hilton shares closed on Friday at 249.25p, down from this year's high of 336.25p.

Hilton chief executive Peter George will also have been impressed by the pounds 390m which Deutsche Morgan Grenfell's venture capitalist arm paid him for Coral. He had bought Coral a year earlier for pounds 363m only to be told to dispose of the chain by the Monopolies & Mergers Commission.

The MMC's decision sparked a furious bidding war between Cinven, the Tote and Deutsche Morgan Grenfell, and most believed that the pounds 390m price tag was generous.

Mr George was highly critical of the MMC's verdict that Hilton's purchase of Coral was anti-competitive. The decision has made it difficult for Hilton to expand its bookmaking arm at a time when fund managers prefer to invest in businesses with significant growth potential. Venture capitalists, by contrast, are attracted to the steady income flows generated by bookmakers. They have become associated with other mature businesses like pubs, which the stock market has spurned.

This year has been a difficult one for bookmakers, especially compared with 1998 - which was boosted by the demand generated by football's World Cup. Recent changes to the rules governing on-course bookmakers have sharpened competition and the industry is also facing calls to increase the contributions it makes to racing.