Market Report: Full house for Rank as shares soar on bid talk
Wednesday 02 June 1999
Shares in the owner of the Hard Rock Cafes and Odeon movie theatres soared a glitzy 15.5p to 239p in big volume of over 6.5m on whispers that a break- up bid was finally on its way. Well-informed dealers said that the perennial takeover target could fall to a management buyout offer financed by a UK venture capitalist or a US leveraged finance specialist.
A cash-rich British venture fund, such as Cinven or Candover, and American financial powerhouses such as KKR could be interested in taking Rank private. Trade bidders - like the Canadian giant Segram and some of the UK brewers - were also mentioned.
The hot gossipers speculated that Rank's long-suffering shareholders, which include the activist fund manager PDFM, will be happy to accept a cash bid north of 300p a share, valuing the leisure group at over pounds 2.3bn.
According to the rumour, the group's new chief executive, former Ladbroke man Mike Smith, will be asked to front the MBO with a brief to slim the company down after the completion of the deal.
Rank's new masters would probably want to dispose of the rather quaint Mecca bingo halls, Tom Cobleigh pubs, and even the Hard Rock burgerdromes. Butlins holidays and Grosvenor's provincial casinos could also go.
The disposals would leave Rank with a pile of of cash and a much-needed focus on its cinema operations, which include the Deluxe video duplication company, the Odeon chain and half of Universal Studios in the US.
The sell-off could also free up resources to expand in other areas such as the National Lottery. Rank was beaten by Camelot in the original auction and could return to the fray if the current operator is dropped at the end of its contract in 2001.
Yesterday, Camelot reported a 19 per cent fall in profits but shareholders Cadbury Schweppes, Racal Electronics and De La Rue did not budge. The chocolate group swirled 3.25p higher at 426.5p and Racal, results today, rose 10.5p to 386p. However, the day's jackpot went to De La Rue. The banknote printer scored a 17.5p advance to 319p - within a whisker of their 12-month high, despite a plunge in profits. Brokers said the earnings fall had been discounted and pointed to a brighter future for the troubled De La Rue.
The rest of the market finished modestly higher after a day of two halves. The FTSE 100 closed 23.8 up to 6250 after bouncing up and down at Wall Street's command. The US market's pre-weekend advance led the blue-chip index to a 128 point gain in the morning. But the rally ran out of steam when the Dow opened sharply lower after some interest rate-negative economic figures. The undercard was steadier, with the midcap finishing 28.6 better at 5667.7 and the Small Cap ending 2.9 up at 2549.6.
Rentokil Initial was in demand once again. The cleaning group mopped up a 12p rise to 264.75p as the recent slide tempted a few bargain hunters. Talk of a share buyback was also heard. The oxygen group BOC inhaled a 36.5p rise to 1,104.5p as dealers muttered that the multi-billion pound merger with US rival Praxair is back on.
Carlton shot to the top of the leaders' board after a Goldman Sachs buy note. The TV group was 27p higher to 524.5p after the broker praised the ONdigital venture with Granada, up 19p to 1,297p.
Analyst support also helped Rolls-Royce and Tesco. The jet-engine maker powered 10.5p ahead to 273p after HSBC said "strong buy". The supermarket moved 3.75p up to 185.5p as Credit Lyonnais pushed it ahead of Friday's annual meeting.
Pub groups were active. Allied Domecq sparkled 20.5p higher to a 12-month high of 619p despite denying talk of an imminent strike by Pernod. The market is convinced that the French drinks giant will move after the sale of Allied's pubs to Whitbread, up 18.5p to 1,129.5p.
Rival Diageo jumped 15.5p to 672p on hopes of news on its advertising programme, while Bass surged 15.5p to 936.5p on talk that it will bid for the bowling alleys owned by First Leisure, up 10.5p to 226p.
Drug stocks were not too excited by revived talk of a merger between Glaxo Wellcome and SmithKline Beecham. Traders paid more attention to a Morgan Stanley downgrade and Glaxo ended just 1p ahead to 1,753p, while SB fell 17.5p to 796.5p. AstraZeneca, down 40p to 2,441p also suffered from Morgan's bearishness.
Among the losers, COLT Telecom shed 44p to 1,274p on fading speculation of a bid from MCI Worldcom. AB Food fell 13.25p to 461.5p, despite share buying by the controlling Weston family, on fears of a European probe into the sugar market. Stagecoach travelled 3p lower to 203p amid worries that it might make a huge acquisition to avoid falling out of the FTSE 100 next week.
The car group Lex Service roared 30.5p ahead to 592p on talk of a pounds 900m bid from Ford. Blue Circle followed suit, cementing a 20p rise to 406.75p after two Greek buys, while Express Dairies jumped 5.5p to 118p after good results and the purchase of the UK unit of Irish rival Glanbia.
The inventions company BTG lost 14p to 251p amid rumours of a delay in some key contracts. Fading bid talk hit cement maker Rugby, down 4.5p to 108.5p and sausage-skin maker Devro, 5p off to 126.5p.
TV company GalaxyMedia was the star of the minnows, rising 7p to 39.5p after saying it will change the terms of the reverse takeover of programme producer Sport News Group. The stock was suspended after close until approval of the new terms.
Burnden Leisure lost 5.5p to 16.5p after its Bolton Wanderers failed to win promotion to football's top flight, while electronic parts distributor Northamber fell 31.5p to 97.5p after a profit warning.
SEAQ VOLUME: 959m
SEAQ TRADES: 73,912
GILTS INDEX: 106.52 -0.87
WEST 175, the AIM-listed producer of cookery TV programmes, could soon be dishing out a couple of acquisitions. Shares in West, where entrepreneur John Gunn has a 23 per cent stake, jumped 12p to a 12-month peak of 123.5p. The firm recently bought large stakes in two New Zealand regional TV stations and it is believed that similar moves are on the cards. The stock was also boosted by news that Apax Partners has become the second market-maker in the shares.
SHIELD DIAGNOSTICS is thought to be close to a major deal.
The biotech company, which yesterday completed its merger with Norwegian rival Axis, should unveil a distribution agreement for its revolutionary test for heart disease over the next few weeks. Shield's partner is believed to be a large US pharmaceutical or biotechnology group. Shares in the UK company rose 7.5p to 442.5p in anticipation of the deal.
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