The memorabilia-themed Hard Rock Café chain may be sold off by Rank in a deal expected to fetch up to £550m, which would complete the break-up of the once huge leisure conglomerate and set it up as a takeover target.
Under its new chief executive, Ian Burke, Rank wants to focus on casinos and bingo and yesterday appointed Merrill Lynch to advise it on "strategic options" for Hard Rock, making an auction likely. City analysts believe the iconic chain, which contributes about 30 per cent of group earnings, could fetch between £450m and £550m.
The global brand - Hard Rock is far more successful outside the UK, especially in the US, even though the first café was opened in London's Piccadilly in 1971 - is now expanding beyond its café origin into hotels, restaurants and casinos, prompting Rank to take stock.
The news fuelled speculation that, once reduced to its Mecca bingo halls and Grosvenor casinos, Rank would attract takeover bids from rival gambling groups and private-equity firms wanting to take advantage of the deregulation of the industry over the next two years. The bookmaker William Hill already came knocking on Rank's door last year but merger talks were called off.
Rank has recently sold off its Deluxe Film arm, severing the last link with its celluloid heritage. The group once spanned Odeon cinemas, Pinewood film studios and Butlin's holiday camps. It is also in the process of selling its Deluxe Media business, which replicates and distributes videos and DVDs, and on Friday announced the sale of the UK operations to Sony for £5.9m.
Hard Rock is likely to attract interest from private-equity players that have been active in leisure, such as Permira, Blackstone, Candover and Cinven. Some say a purchase by an American company would be the most likely.
Nigel Parson, at Williams de Broë, said: "This is a right decision and the prospect of a US listing for a revitalised business should be the lure to drive a healthy auction. Some of the branded US restaurant chains trade at up to 30 to 50 times price-to-earnings multiples. Hard Rock is not there yet but it is a global brand and sales are recovering strongly."
Hard Rock posted like-for-like sales growth of 8 per cent in the past six months. Rank's Grosvenor casinos also saw 8 per cent growth but admissions have weakened in recent weeks because of the warm weather and the start of the World Cup.
Rank's 14 bingo halls in Scotland, however, have been hit hard since a smoking ban was introduced at the end of March - revenues fell 14 per cent, with admissions down 6 per cent and spend per head 9 per cent lower. Rank is trying to lure smokers back into the clubs by offering bigger prizes and launching handheld terminals.Reuse content