Stock Exchange to investigate leak of Stanley's casinos bid

The London Stock Exchange was yesterday considering launching an investigation into irregular trading in London Clubs International shares after the price roseby 40 per cent in the two weeks before the company received a bid from rival Stanley Leisure.

The LSE has been looking closely at the trades, which were much higher than normal dealing volumes. It may pass the case on to the Financial Services Authority to scrutinise more closely to try to discover whether individuals in the market knew about and were acting on the £250m bid by Stanley Leisure, which leaked out in Sunday press reports.

The move came as Stanley Leisure confirmed "it has held some discussions" with other parties about the possibility of making an offer for LCI, which owns a string of prestigious casinos including 50 St James.

Stanley Leisure has prepared its informal offer in conjunction with venture capitalist Hg Capital, which would take on some of LCI's casinos and would hand them over to be run by former LCI chief Alan Goodenough.

City sources said Mr Goodenough's involvement had displeased a number of LCI's shareholders because he presided over the company's disastrous investment in the Aladdin casino in Las Vegas, which filed for Chapter 11 bankruptcy protection last year.

Trading volumes in LCI shares raced ahead from an average daily rate of about 460,000 in early November to 2.8 million in the past fortnight. Last Thursday and Friday saw 5.5 million and 6 million shares change hands respectively. The shares jumped from 15.5p on 18 November to 22p yesterday, down 1.25p from Friday's close.

LCI said there had been "abnormally high" levels of trading in its stock in the past two weeks, but added: "The first we knew about the Stanley Leisure interest was when we picked up the papers on Sunday."

It said if the FSA were to investigate the level of trading, LCI would "help them with their inquiries". The LSE and FSA never comment on investigations into individual companies.

Stanley Leisure is likely make a formal offer for LCI in the next few weeks as LCI, one of its main rivals, will not allow it to do due diligence on its books before it has received a formal approach.

The Stanley Leisure-Hg Capital consortium has received an indication from LCI's main creditor, the Bank of Nova Scotia, that it would be interested in pursuing talks.

LCI has debts of £240m, most of which it owes to the bank, including £180m from its investment in Aladdin.