Malaysian tycoon's £586m offer for Rank is a 'value play', say insiders

Guoco won't 'hassle' shareholders after bingo hall operator refuses 150p-a-share bid
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The Independent Online

Guoco Group, the Hong Kong-based investor, will not "go out and hassle" shareholders in Rank, over its mandatory £585.8m offer for the European gaming business.

Guoco was forced to make the offer after buying the 11.6 per cent shareholding of Malaysia-based Genting Berhad late on Friday. This took Guoco's stake in the FTSE 250 group to 40.8 per cent, meaning that it had gone above the 30 per cent threshold that compels an investor to make an offer under the Takeover Code.

However, sources close to Guoco, which is run by Malaysian tycoons Quek Leng Chan and Kwek Leng Hai, said that this "was not a traditional offer". He added: "We're not going to go out and hassle shareholders. This is not about getting hold of the business, this is a value play. We're happy either way [taking over or retaining a 40.8 per cent stake]."

Rank, which runs Mecca Bingo and Grosvenor Casinos, dismissed the offer this weekend. In a statement, it said: "The board has considered the offer and believes that it significantly undervalues Rank and its prospects and, as a result, recommends that shareholders do not accept it."

Guoco bought the Genting stake for 150p a share, which is what triggered the seemingly low takeover price. The offer is only a 0.8 per cent premium on Rank's closing share price on Friday which was 148.8p.

But, that price did include a 1.9p increase that came in the closing minutes of trading on Friday, after Guoco subsidiary All Global Investments made the announcement at 4.44pm.

The announcement said that the offer would not be raised and also backed Rank's "strong" executive management team. It also showed that Guoco is being advised by the London office of Evercore Partners, a multinational investment bank.

Shareholders have 28 days to consider the offer. Management, led by the chief executive, Ian Burke, and chairman, Peter Johnson, are thought to be considering their defence strategy with adviser Goldman Sachs.

However, it is believed that management will soon go to major shareholders directly to make the case for not selling. One investor said: "That price wouldn't be for minority shareholders, particularly given the roll-out plans and the VAT ruling."

Rank received a £154.3m payout from HM Revenue & Customs in March, following a long-running dispute over £74.8m of overpaid VAT between 1973 and 1996. The balance was made up of £79.5m of interest. This allowed the roll-out of its new casinos and bingo halls to be funded from cash leaving a warchest for acquisitions.