Shareholders angry at Rank scrip offer

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RANK ORGANISATION is facing investor and regulatory anger after accepting a second-best deal on last week's scrip dividend offer, which gave shareholders less cash than they might have received.

Shareholders want to know why the company accepted a deal with Barclays de Zoete Wedd when it had been offered a better one by Swiss Bank Corporation.

Rank, Britain's largest pure leisure company, surprised the market on Thursday with an extraordinarily large scrip dividend deal, which will save the company pounds 124m in advance corporation tax. The company decided to pay both its interim and final dividend halfway through the year, and then to offer shareholders the equivalent of 46.5p in shares - worth 50 per cent more than the cash dividend - if they took the scrip instead.

Scrip issues are a way in which companies can avoid the advance corporation tax charge on cash dividends paid to shareholders.

As has become common practice in enhanced scrip dividend deals, BZW - as Rank's financial advisers - offered to repurchase any shares at a price equal to 99 per cent of their face value. BZW would also keep any profits it received from selling the shares in the market.

Despite this being the highest cash alternative yet offered in scrip dividends, the Independent on Sunday has learned that Rank refused a higher offer made by Swiss Bank Corporation.

SBC is understood to have offered face value for the shares. It had offered 99 per cent of the shares' value when BZW was offering 98 per cent, but BZW increased its offer late in the bidding process. When SBC was told of the increased offer, it said it would pay face value, but Rank still accepted the BZW offer.

Both BZW and Rank admit SBC's offer was higher but claim there were factors that meant the BZW offer was better.

Henry Lloyd, a director of BZW, said: 'It was fair to accept our offer when the company weighed up who was offering best execution, along with the commercial structure of the deal and how much it would cost the company.'

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