Private-equity groups are circling Ladbrokes, the betting-shop chain owned by the leisure group Hilton, with a view to making a bid of up to £4bn.
CVC Capital, Blackstone and BC Partners have sounded out Hilton in recent weeks about a potential deal. All three declined to comment yesterday, but Hilton said it had "received expressions of interest" in Ladbrokes.
A relaxation of gaming laws has made Britain's gaming groups more attractive to potential bidders. Experts reckoned Ladbrokes caught the eye because of its solid management, strong cash flows and growth potential. It owns Europe's second-biggest internet poker site.
Hilton's board met this week to discuss the planned £3.6bn sale of its hotels business to the US's Hilton Hotels. That, the company said, remains its priority, but the private-equity approaches for Ladbrokes were also thought to have been on the agenda at the meeting. Should the hotels deal fall through, a flotation of Ladbrokes is another possibility under discussion.
Stuart Fraser, at Brewin Dolphin, said: "Private-equity firms like strong cash flow and you have that in a betting operation. I think they want to get in there before a possible IPO."
Talks about a sale of the hotels have been running since October, but both sides are hopeful of a result within a fortnight. If successful, the Hilton brand would be reunited after more than 40 years, and leave British shareholders to inherit a stand-alone gaming company with debts of about £900m. The London-based group runs about 400 hotels outside the US and more than 2,100 Ladbrokes bookies.
Betting shops have proved lucrative for private-equity groups. Coral was sold to Gala by the private-equity group Charterhouse, which had invested about £200m of equity but generated almost £1.2bn by refinancing twice then selling.Reuse content