Outlook: Ladbroke

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The Independent Online
RATHER AGAINST the odds, Ladbroke's Peter George, has ridden a winner with the sale of the Coral betting shop chain to the German-owned Morgan Grenfell Private Equity. When he was blocked from keeping the business after having paid Bass such a full price, his card looked well and truly marked. Not only did the Trade Secretary Peter Mandelson order a complete divestment, he gave Ladbroke only six months to conclude a deal and stipulated that Coral could not be sold off piecemeal.

From this inauspicious starting point, Mr George has succeeded in selling the business for a 10 per cent premium. The extra pounds 33m he has raised more than covers the interest costs Ladbroke has borne during the 12 months that it has been stabling the business. On top of that Ladbroke has pocketed pounds 40m of profit from Coral during its 12 months of ownership..

The question is what does Mr George do with the cash. As the UK's leading bookmaker, further expansion here has already been ruled out nor does Ladbroke appear interested in entering the US betting market. That leaves the other main leg of the business, hotels. In Europe, there are not many opportunities on the horizon. In the US there are more possibilities. The difficulty is that Ladbroke already has a relationship with Hilton in the US through its ownership of the brand outside the US. Going into direct competition with Hilton in its own backyard may not be a sensible move when the theory is to bring the two halves of the Hilton empire closer together.

Mr George could do the radical thing and hand the cash back to shareholders. Companies are often loathe to do that since it smacks of the management having run out of ideas. But Mr George might take a tip from Nomura which owns the William Hill chain. Just as one foreign owned bank is entering the betting market, Normura is cashing in its chips by floating William Hill and recycling the cash.

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