Rank is expected to confirm plans to demerge its Deluxe film business this week in a move that will bring down the curtain on more than 60 years of cinematic history for the leisure group.
The company is likely to announce that it has opted to spin off the unit into a separately listed vehicle when it reports its annual results on Friday. It will also announce it is seeking buyers for Deluxe's media arm.
The slimmed-down Rank, which many analysts have tipped as a takeover target, will look at ways to integrate its remaining Mecca Bingo and Hard Rock Café divisions. Mike Smith, the chief executive, opened the first Hard Rock Casino in Leicester Square in 2002 and is expected to roll out the format to other locations.
Rank's brokers, Merrill Lynch and Deutsche Bank, are likely to advise on the flotation of Deluxe Films, which could have an enterprise value of about £600m, including up to £300m of debt. The business made profits of £72.3m on sales of £396m last year.
The group has been investigating how to separate its film arm since last September. It last tried to sell Deluxe four years ago, when it sold off a host of disparate leisure interests from its Tom Cobleigh pub estate to its Butlins holiday parks.
Before Rank could announce its plans for Deluxe, it had to wrestle with the change-of-control clauses that govern its contracts with the major film studios. It has held detailed negotiations with each film studio, and is thought to have bought its release from the contracts.
Goldman Sachs, the US investment bank tasked by Rank with the strategic review that prompted the demerger decision, is understood to have recommended that the company hives off its less successful Deluxe Media unit before the flotation. The sale of the business, which makes and distributes videos and DVDs, is likely to net Rank about £50m. It had profits of £21.5m on turnover of £392m last year.
Mr Smith has said he does not intend to re-christen the group, which was founded in the 1940s by J Arthur Rank and quickly became a leading UK film producer and cinema owner. The company, which made its name in cinema with the Carry On series, still uses the "man with the gong" as its emblem.
Deutsche Bank recently issued a research note predicting that private equity groups would be likely to crunch Rank's numbers after the demerger of Deluxe. Rank's remaining businesses include Grosvenor Casinos and Blue Square, an online bookmaker. It had hoped to turn its Mecca Bingo estate into three-in-one gambling palaces, combining bingo, gaming and bookmaking under one roof, but the Government's U-turn on the Gambling Bill has stymied its plans.
A spokesman for Rank declined to comment yesterday on the specifics of Friday's announcement.
- More about:
- Deutsche Bank
- Film Producers
- Investment Banks
- Mergers And Acquisitions