Rank says goodbye to redcoats in £700m sale

Rank Group, owner of the Hard Rock Café chain, has sold its UK holidays division which includes the Butlins family entertainment resorts, to the privately owned Bourne Leisure Group for up to £700m. Rank will now focus on its gaming and restaurants activities.

Rank Group, owner of the Hard Rock Café chain, has sold its UK holidays division which includes the Butlins family entertainment resorts, to the privately owned Bourne Leisure Group for up to £700m. Rank will now focus on its gaming and restaurants activities.

Bourne is the UK's second-biggest caravan park operator owned by Peter Harris, a millionaire racehorse trainer. It will buy the Rank holiday interests for £650m, with a further installment of up to £50m at the end of 2002, depending on Butlins' financial performance. Rank's Holiday Division also includes Haven, the largest caravan park owner in the UK; Warner, which runs 13 hotels; and the Oasis holiday village, in the Lake District. Rank's shares, which hit a record low of 130p in May, rose 9p, or 5.9 per cent, to close at 161p.

Mr Harris, who has been dubbed the "the king of syndicate trainers", started Bourne 35 years ago and expanded it to operate 21 caravan parks. It reported sales of £150m in the 12 months to 31 December 1999.

Despite the sale, the future of Butlins, famous for its red-coats, remains uncertain. Rank's Holiday Division made a pre-tax profit of £63m in the year to 31 December 31 on sales of £419m, but Butlins, founded by holiday camp pioneer Sir Billy Butlin, has been the unit's worst performer.

Rank, which bought the company from Sir Billy in 1972, has poured in £150m since 1997 on upgrades and at Easter last year Butlins was relaunched with three family entertainment resorts, closing two others and rebranding the sixth. Even so, losses in the six months to 30 June 2000 widened to £10.1m, from £5.6m in the corresponding period.

Bourne is believed to be looking at a sale of Butlins or a closure of the business if its poor financial performance continues. As part of the purchase, Bourne will pay Rank £30m if Butlins earns £40m before interest, tax, depreciation and amortisation in the next two years, and £50m if it makes £50m in 2001 and 2002.

Rank has now sold £1.4bn of assets since Mike Smith was appointed chief executive in April last year. In June it sold a 50 per cent stake in Universal Studios Escape, a Florida theme park, for £182m cash. Italso sold Tom Cobleigh, the pub chain, for £90m; Odeon cinemas for £380m; Pinewood Studios for £82m and nightclubs worth £150m. That slashed debt to £140m, from a high of £1.5bn.

"Rank has solved its debt problem and investor attention will now switch to its ongoing strategy," including possible acquisitions or a return of cash to shareholders, said Simon Larkin, an analyst at ABN Amro. The company is expected to continue its divestments by selling Deluxe, a film processing and video duplication company that has worked on film hits such as Star Wars.

Rank owns Grosvenor Casinos and Mecca bingo halls and is looking to develop online gaming and interactive television businesses. It operates more than 100 Hard Rock Café outlets worldwide.