7th Dec 2006 07:03
Rank Group PLC07 December 2006 7 December 2006 CONCLUSION OF STRATEGIC REVIEW AND DISPOSAL OF HARD ROCK FOR US$965 MILLION (£490 MILLION) The Rank Group Plc ("Rank" or the "Group") announces that, following a review ofits strategic options, it has reached an agreement with Seminole Hard RockEntertainment, Inc. ("Seminole"), a wholly owned subsidiary of the SeminoleTribe of Florida, to sell the Hard Rock business ("Hard Rock") for a totalconsideration of US$965 million (equivalent to approximately £490 million) (the"Disposal"). Following the completion of this transaction, Rank intends toreturn £350 million (equivalent to approximately 65p per share) to shareholdersthrough payment of a special dividend, and to effect a share consolidation. Highlights: • A review of strategic options has resulted in the sale of Hard Rock to Seminole • Completes transformation of Rank from a diversified leisure group into a focused gaming business • Hard Rock value is maximised for shareholders via an outright sale • Total consideration of US$965 million (equivalent to approximately £490 million) payable in cash • Total enterprise value of US$975 million including the assumption by Seminole of approximately US$10 million of capitalised leases • Net proceeds of approximately £460 million, after transaction costs and tax • Intention to return £350 million to shareholders via a special dividend • There is no change to the expected level of the final dividend for the financial year to 31 December 2006 • The Disposal is expected to complete on 5 March 2007 Commenting on the Disposal, Ian Burke, chief executive of Rank said: "Today's announcement sets a clear strategic course for Rank as a focused gamingbusiness. We have maximised the value of Hard Rock through this disposalfollowing a thorough strategic review and competitive auction. We intend toreturn £350 million of the proceeds to shareholders, reflecting the ongoingcapital requirements of the Group. This will bring the total amount returned toshareholders since March 2006 to £625 million, including dividend payments. "We have established clear plans to capitalise on the changes taking place in UKgaming in order to generate sustained growth in profits and improvements in ourreturn on capital employed. In spite of a number of near-term challenges, webelieve that our considerable operating experience and our strong portfolio ofgaming assets will enable us to take advantage of the long-term growth in thegaming market. "In recent months we have made progress on the key strategic objectives that wehighlighted at the time of our interim results: completing the review of HardRock, exiting non-core businesses, restructuring our balance sheet, generatingoverhead and operating efficiencies and driving operational improvements fromour gaming businesses. We believe that this strategy is in the best interests ofour shareholders." Merrill Lynch International is acting as lead financial adviser and corporatebroker to Rank. Goldman Sachs International is also providing financial adviceto Rank in relation to the Disposal. This summary should be read in conjunction with the full text of thisannouncement. A circular containing further details of the Disposal and setting out a noticeof the Extraordinary General Meeting will be sent to Rank shareholders shortly. Analyst Meeting and Webcast There will be an analyst meeting at Goldman Sachs International, River Court,120 Fleet Street EC4A 2QQ, starting at 11.30am. Later today a copy of the presentation as well as webcast and dial-in recordingsof the meeting will be available from the Group's website (www.rank.com). Dial-in details are listed below:UK Access Number +44 (0)20 8609 0289 or 0800 358 2189US Access Number +1 866 676 5865Conference Reference 158789# Enquiries RankDan Waugh, director of investor relations 01628 504053 M: CommunicationsNick Fox 020 7153 1540Lisa Gordon 020 7153 1548 Merrill Lynch International 020 7628 1000Simon Mackenzie-SmithNoah BulkinMichael Findlay (Corporate Broking) Goldman Sachs International 020 7774 1000Richard Campbell-BreedenNick Harper Merrill Lynch International is acting for Rank in relation to the mattersdescribed in this announcement and, with the consent of Rank, members of theMerrill Lynch Group are providing acquisition finance to the Seminole Tribe ofFlorida in relation to the Disposal. No member of the Merrill Lynch Group isacting for or advising any other person in relation to the Disposal andaccordingly no such member will be responsible to any other person for providingthe protections afforded to clients of the Merrill Lynch Group or for advice inrelation to the matters described in this announcement. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting for Rank in relation tothe matters described in this announcement and is not advising any other personand accordingly will not be responsible to any person other than Rank forproviding the protections afforded to the customers of Goldman SachsInternational or for providing advice in relation to the matters described inthis announcement. 7 December 2006 CONCLUSION OF STRATEGIC REVIEW AND DISPOSAL OF HARD ROCK FOR US$965 MILLION (£490 MILLION) Introduction The Rank Group Plc ("Rank" or the "Group") announces that, following a review ofits strategic options, it has entered into an agreement to sell the Hard Rockbusiness ("Hard Rock"), the rock-music based entertainment business, to SeminoleHard Rock Entertainment, Inc. ("Seminole"), a wholly owned subsidiary of theSeminole Tribe of Florida for a total consideration of US$965 million(equivalent to approximately £490 million) payable in cash (the "Disposal"),subject to certain adjustments to be made following completion of thetransaction. It is expected that tax and transaction costs of approximately £30million will arise from the Disposal, payable by Rank. It is intended that, following completion of the Disposal, Rank will return toshareholders £350 million (equivalent to approximately 65 pence per Rank Share)by way of a special dividend. This will be accompanied by a consolidation of theissued share capital of Rank. The exact level of consolidation will be disclosedwithin a circular to be sent to Rank shareholders shortly. After the payment of the special dividend, anticipated taxation and other costsassociated with the Disposal, the remaining proceeds of approximately £110million will be used to reduce general corporate borrowings. The Disposal isexpected to be dilutive to reported earnings per share for Rank in 2007. In view of its size, the Disposal is conditional, amongst other things, upon theapproval of Rank shareholders at an Extraordinary General Meeting, to be held inJanuary 2007. Background to and reasons for the Disposal The Board of Rank announced on 4 July 2006 that it had decided to review thepotential strategic options for Hard Rock. Following completion of the review inDecember 2006, the Board decided that the disposal of Hard Rock by Rank toSeminole for US$965 million (equivalent to approximately £490 million) is in thebest interests of Rank's shareholders. Hard Rock has limited synergies with the rest of the Group and delivery of itsgrowth strategy would require a significant increase in capital expenditure overthe medium term. Through a competitive auction process Rank has been able tomaximise the value of Hard Rock for its shareholders. The Disposal will allow Rank to focus on its gaming operations (which are mainlylocated in the UK) during a key period for the industry. Rank sees considerablelong-term opportunities for its gaming businesses as a result of the fullimplementation of the 2005 Gambling Act and societal changes in attitudestowards gaming. Rank believes that as a focused gaming operator it is betterable to manage a number of near-term challenges, notably the extension from 2007of a smoking ban across the UK. Approvals and Consents The Disposal is subject to the approval of Rank shareholders at an ExtraordinaryGeneral Meeting to be held in January 2007. A circular setting out the notice ofthe Extraordinary General Meeting, including the Rank directors' recommendationto vote in favour of the Disposal is expected to be sent to Rank shareholdersshortly. The Disposal is expected to be completed on 5 March 2007. Merrill Lynch International is acting as lead financial adviser and corporatebroker to Rank. Goldman Sachs International is also providing financial adviceto Rank in relation to the Disposal. Information on Rank Rank is a leading gaming group, operating principally in the United Kingdom. TheGroup holds strong positions in the bingo clubs and casinos markets and hassportsbook and on-line gaming capabilities through its interactive business,Blue Square. Rank's continuing operations comprise: • 113 bingo clubs across the UK • 11 bingo clubs in Spain • 35 casinos in the UK and Belgium • Blue Square on-line betting and gaming • Blue Square telephone betting Capital Structure The Board believes that Rank's capital structure policy, announced on 3 March2006, remains appropriate for the future growth and investment of the Group. Assuch, it will remain unchanged at a target net debt to EBITDA of 3.5x-4.0x.There is no change to the expected level of the final dividend for the financialyear to 31 December 2006. The Directors intend to maintain, at a minimum, theabsolute level of dividend per share in 2007 compared to 2006. Furthermore, theDirectors intend to target a dividend cover of 2.0 times earnings over themedium term. Rank current trading A trading statement for Rank for the 48 weeks to 26 November 2006 was issuedthis morning. Information on Hard Rock Hard Rock is a leading rock-music based entertainment brand. Hard Rock brandedassets around the world, with the exception of the Hard Rock Hotel and Casino inLas Vegas and the Hard Rock Casino in London, are either owned and operated byHard Rock, or operated under franchising or brand licensing agreements. The HardRock Casino in London will continue to be owned and operated by Rank. During2007 it will be re-branded under a Rank Gaming casino brand. Hard Rock'sportfolio currently includes: • 124 Hard Rock Cafes • 4 Hard Rock Hotels • 2 Hard Rock Casino Hotels (locations that include both a hotel and a casino) • 2 Hard Rock Live! concert venues • equity stakes in three unbranded hotels For the year ended 31 December 2005, the financial statements of Hard Rock wereprepared under IFRS. In the current year, Hard Rock generated revenues of £250.1million, profits before interest and taxation of £34.8 million, had net assetsof £156.3 million and gross assets of £188.9 million. The unaudited financialresults of Hard Rock for the six months ended 30 June 2006 were prepared underIFRS. In this period, Hard Rock generated revenues of £133.7 million, profitsbefore interest and taxation of £18.9 million, had net assets of £171.8 millionand gross assets of £204.5 million. Hamish Dodds has been the President andChief Executive of Hard Rock since 2004. Analyst Meeting and Webcast There will be an analyst meeting at Goldman Sachs International, River Court,120 Fleet Street EC4A 2QQ, starting at 11.30am. Later today a copy of the presentation as well as webcast and dial-in recordingsof the meeting will be available from the Group's website (www.rank.com). Dial-in details are listed below:UK Access Number +44 (0)20 8609 0289 or 0800 358 2189US Access Number +1 866 676 5865Conference Reference 158789# Enquiries RankDan Waugh, director of investor relations 01628 504053 M: CommunicationsNick Fox 020 7153 1540Lisa Gordon 020 7153 1548 Merrill Lynch International 020 7628 1000Simon Mackenzie-SmithNoah BulkinMichael Findlay (Corporate Broking) Goldman Sachs International 020 7774 1000Richard Campbell-BreedenNick Harper This announcement is for information purposes only and does not constitute anoffer or invitation to acquire or dispose of any securities or investment advicein any jurisdiction. Merrill Lynch International is acting for Rank in relation to the mattersdescribed in this announcement and, with the consent of Rank, members of theMerrill Lynch Group are providing acquisition finance to the Seminole Tribe ofFlorida in relation to the Disposal. No member of the Merrill Lynch Group isacting for or advising any other person in relation to the Disposal andaccordingly no such member will be responsible to any other person for providingthe protections afforded to clients of the Merrill Lynch Group or for advice inrelation to the matters described in this announcement. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting for Rank in relation tothe matters described in this announcement and is not advising any other personand accordingly will not be responsible to any person other than Rank forproviding the protections afforded to the customers of Goldman SachsInternational or for providing advice in relation to the matters described inthis announcement. APPENDIX 1 - SOURCES AND BASES OF INFORMATIONIn this announcement, unless otherwise stated or the context otherwise requires,the following sources and bases of information have been used unless otherwisestated. The financial information relating to Hard Rock has been extracted fromthe audited financial statements of Rank for the relevant financial year. An exchange rate of GBP/US$ of 1.97 has been used throughout this announcement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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