Ladbroke buys Stakis chain for pounds 1.2bn

LADBROKE, THE hotels and gaming group, yesterday moved quickly to complete its bid for Stakis, the Glasgow-based hotels chain, with a recommended cash and share offer valuing the group at pounds 1.16bn.

The deal, which comes just five days after talks were first disclosed, sparked a surge in both companies' share prices with Stakis shares soaring 11 per cent to 157p.

This is well in excess of the 144.25p offer price indicating the possibility of a rival offer from another leisure group such as Whitbread or Accor of France.

However, Ladbroke said the Stakis share price could be explained by the rise in its own shares, which closed 16 per cent higher at 269p thereby increasing the value of the share element of its offer. The deal is likely to signal the disappearance of the Stakis name, as its hotels will be rebranded under Ladbroke's Hilton name. It will net the Stakis family around pounds 60m including pounds 10m for the founder, Sir Reo Stakis, the 85-year- old Greek Cypriot, who set up the business in 1942.

"Reo voted for the deal but I'd being lying if I said he'd done so without a tear in his eye," said Stakis' chief executive David Michels who helped restore the group's fortunes after its near collapse seven years ago. He added: "I suppose it's a bit like watching your mother-in-law drive off a cliff in your new car."

The deal takes Ladbroke from 38 hotels to 93 and makes the combined group the largest operator of four star hotels in the country and the third largest hotels group in London after Granada and Thistle. It also creates the UK's second largest gaming group after Rank with Ladbroke's five London casinos added to Stakis' portfolio of 22, mostly provincial sites. "It is rare to find a business that represents such a perfect operational mix and complementary geographic fit," said Peter George, Ladbroke's chief executive.

The deal sees Mr Michels elevated to Ladbroke's main board and appointed head of its enlarged Hilton hotels division. He will replace David Jarvis who could be in line for a pounds 1m pay-off. However, Mr George denied that the Stakis man is being groomed as his successor.

The deal nets a pounds 1.5m shares and options windfall for Mr Michels, although he will take 60 per cent of the proceeds in Ladbroke shares. Stakis staff, who own around 3 per cent of the company will net over pounds 30m between them.

The takeover will result in annual cost savings of pounds 16m from next year. There will be job losses, with the Stakis head office in Glasgow moved to Watford and the likely closure of overlapping divisional offices. However, Mr Michels said the company will maintain a presence north of the border.

The terms of the Ladbroke offer are 57.7p in cash plus 0.382 new Ladbroke shares for each Stakis shares held.