Northern Leisure buys Rank's chain of 55 clubs for £150m

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The Independent Online

RANK, the struggling leisure group that owns Odeon cinemas, Butlins holiday camps and Hard Rock Cafes, yesterday agreed to sell its clubs and late-night venues to Northern Leisure, the UK's largest club operator, for £150m.

RANK, the struggling leisure group that owns Odeon cinemas, Butlins holiday camps and Hard Rock Cafes, yesterday agreed to sell its clubs and late-night venues to Northern Leisure, the UK's largest club operator, for £150m.

Adam Mills, Northern's chief executive and one of the two entrepreneurs credited with building the National Express bus empire, defended his company against claims that it was overpaying for the Rank package.

"People have not taken into account the fact that the Rank estate was trimmed of underperforming units in 1998. Since then, the company has heavily invested in the division," he said.

Under the deal, 37 clubs will change hands as well as nine Jumpin' Jaks themed bars, six Hotshots sports and bowling bars and three other leisure outlets, including an ice rink and an indoor bowling hall.

Asked why his company was increasing its stake in the club business while other operators, such as Rank and First Leisure were pulling out, Mr Mills said: "Others are getting out for different reasons. Rank had to sell something because it has an overstretched balance sheet, and First Leisure is focusing on the health club market, having lost its way in the clubs sector."

Northern, which after yesterday's deal owns 125 clubs, will part-finance the acquisition by a placing and open offer of shares at 140p to raise £62.2m. The remaining funds will be raised by new bank facilities.

Analysts said the deal would be earnings enhancing for Northern. One said: "The more you look into it, the better the deal is." He added that Northern would see a range of cost benefits from swallowing up the Rank unit, including eliminating the need to discount prices to compete with the Rank clubs.

Mr Mills said Northern will continue to make acquisitions at a rate of about 15 clubs a year.

The deal was seen as the first of a stream of disposals of Rank's underperforming units. The company will use the proceeds to reduce its debts, which stand at about £1.3bn.

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