Ladbroke closure sparks bid rumours

Clifford German
Sunday 23 October 2011 08:45

Ladbroke yesterday fuelled further speculation that it was about to launch a counter takeover bid for Capital Corporation, owner of Crockford's casino, by unexpectedly announcing the closure of its property division 48 hours before it is due to release financial results for 1996.

News of the closure, which involves Ladbroke writing off pounds 52m and selling a substantial chunk of its remaining commercial property portfolio to Minerva for pounds 25m, also came on the day that London Clubs published its formal offer document for Capital Corporation.

Leisure analysts in the City interpreted Ladbroke's announcement as clearing the decks ahead of a move for Capital. There is also some speculation that Peter George, chief executive of Ladbroke, may instead have his sights targeted on London Clubs itself.

London Clubs is offering 47 shares for every 100 in Capital Corporation, which values the target at almost pounds 180m. London Clubs shares rose 3p to 384p last night which values Capital Corporation shares at 180p. But Capital's shares were unchanged at 202p with investors anticipating a better offer.

Crucial to the offer could be the six shareholders which have over 50 per cent of both companies. London Clubs has comfortably outperformed Capital over the past three years in profits growth and share price performance, and its offer is already 31 times Capital's likely earnings per share in 1996 and 20 times its prospective earnings in 1997. But it is already committed to an expensive refurbishment programme, there is no cash alternative and the way is open for bigger rivals, which could include Rank as well as Ladbroke, to enter the fray.

Greg Freehely, an analyst at Dresdner Kleinwort Benson, believes, however, that Ladbroke would do better to use its links with Hilton Hotels to invest directly in casinos in Las Vegas, where returns are higher, rather than get involved in a bidding war with London Clubs.

Ladbroke's decision to close its property division has been on the cards since the company's founder, Cyril Stein, retired in 1994. At its peak in 1993 the property portfolio was worth pounds 1bn and made a profit of pounds 45m. It had been run down to pounds 373m by the end of 1995 and the rump is now valued at less than pounds 70m.

The property division will be treated as a discontinued activity in the 1996 accounts. After property dealing losses of pounds 5.6m its operating profit was pounds 500,000.

Ten properties are being sold to Minerva at a 27 per cent discount to book value. Only pounds 16m is payable on completion - the balance will be staggered over the next five years. It is Minerva's first acquisition since it was floated last November. Ladbroke also confirmed the sale of a large office building in Boston, Massachusetts, to HN Gorin for $23m.

The closure of the property division is accompanied by exceptional costs of pounds 52.3m mainly to cover losses on the disposals and to write down the remaining portfolio to a realistic value for quick sales.

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