28th Dec 2005 07:01
Rank Group PLC23 December 2005 Not for release, publication or distribution in or into the United States,Australia, Canada or Japan DISPOSAL OF DELUXE FILM FOR US$750 MILLION (£430 MILLION) The Rank Group Plc ("Rank" or the "Company"), the international gaming andleisure group, today announces that it has reached agreement to sell Deluxe Film, the film processing and creative services business to DX III HoldingsCorporation, a subsidiary of MacAndrews & Forbes Holdings Inc. (the"Disposal"). Highlights: • Aggregate consideration of US$750 million (equivalent to approximately £430 million) payable in cash, on a debt and cash free basis • The Company's capital structure and dividend policy are currently under review. The outcome of that review will accompany Rank's 2005 preliminary results announcement on 3 March 2006 at which time Rank expects to announce a return of capital to shareholders • There is no change to the expected level of the final dividend for the financial year to 31 December 2005 • The Disposal is conditional upon obtaining clearances from US Canadian and Spanish anti-trust authorities and the approval of Rank shareholders at an Extraordinary General Meeting to be held on Monday, 16 January 2006 • The Disposal is expected to complete in early 2006 Commenting on the Disposal, Mike Smith, Chief Executive of Rank said: "Today's announcement of the sale of Deluxe Film represents an important stagein the strategic evolution of The Rank Group. Rank will now concentrate on thegrowth opportunities in its gaming businesses and in Hard Rock. Our immediatepriorities are the disposal of Deluxe Media Services and the completion of areview to establish an appropriate capital structure and dividend policy for thecontinuing group. We expect that this process will result in a return of capitalto shareholders. We will announce the outcome of the review on 3 March 2006 whenwe present Rank's 2005 preliminary results." This summary should be read in conjunction with the full text of thisannouncement. A circular containing further details of the Disposal and setting out the noticeof Extraordinary General Meeting will be sent to Rank shareholders shortly. Goldman Sachs International is acting as exclusive financial adviser to Rank onthe disposal of Deluxe Film. Enquiries: The Rank Group Plc Tel: +44 (0) 20 7535 8031Dan Waugh (Director of Investor Tel: +44 (0) 7799 581763Relations) Goldman Sachs International Tel: +44(0) 20 7774 1000Nick ReidNick Harper Maitland (Press enquiries) Tel: +44(0) 20 7379 5151Angus Maitland Tel: +44(0) 7785 268283Annabel Tuck Tel: +44(0) 7932 774335 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. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority is acting exclusively for Rank in relation to the matters described in this announcement and is not advising anyother person and accordingly will not be responsible to any person other thanRank for providing the protections afforded to the customers of Goldman SachsInternational or for providing advice in relation to the matters described in this announcement. Not for release, publication or distribution in or into the United States,Australia, Canada or Japan DISPOSAL OF DELUXE FILM FOR US$750 MILLION (£430 MILLION) Introduction The Rank Group Plc ("Rank" or the "Company") announces that it has entered intoan agreement to sell the Deluxe Film business ("Deluxe Film") to DX III HoldingsCorporation, a subsidiary of MacAndrews & Forbes Holdings Inc., for an aggregateconsideration of US$750 million (equivalent to approximately £430 million)payable in cash (the "Disposal"), on a debt and cash free basis, subject to acompletion working capital adjustment. Proceeds will be used initially toreduce general corporate borrowings. It is expected that no material tax costwill arise from the Disposal. The Disposal is conditional, amongst other things, upon obtaining clearancesfrom the US, Canadian and Spanish anti-trust authorities and the approval ofRank shareholders at an Extraordinary General Meeting, to be held on Monday, 16January 2006. Background to and reasons for the Disposal The Deluxe businesses, Deluxe Film and Deluxe Media Services ("Deluxe Media"),have been important parts of Rank, but in recent years the Company hasacknowledged that they were the "least best fit". Against the background of theanticipated deregulation of UK gaming laws and further opportunities for theHard Rock brand, the Board decided in September 2004 that, in principle, it wasan opportune time to separate both Deluxe Film and Deluxe Media from the rest ofRank. The announcement of the Disposal follows an exhaustive sale process. The Board remains convinced that the sale of Deluxe Film is in the best longterm interests of the Company, although the Disposal is expected to diluteRank's future earnings per share.* The sale of Deluxe Media remains a priority for the Company. Capital Structure and Dividend Policy Rank is conducting a review of its capital structure and dividend policy with aview to putting in place an efficient capital structure for the ongoing group. Key factors in concluding this review are: the finalisation of the net proceedsof the sale of Deluxe Film (principally in relation to any working capitaladjustment); the costs of restructuring the Company's borrowings; the conclusionof discussions with Rank's Pension Trustee and the Pension Regulator; progressin relation to the sale of Deluxe Media; and the determination of the financialcapacity needed to support the Company's future growth. Rank intends to presentthe results of this review, including an expected return of capital toshareholders, at the time of its preliminary results announcement on 3 March2006. * References to the anticipated effect of the Disposal on future earnings of the Company should not be interpreted as a profit forecast nor should this statement be interpreted to mean that the earnings of the Company following the Disposal will necessarily match or exceed the historical published earnings. There is no change to the expected level of the final dividend for the financialyear to 31 December 2005. Approvals and Consents The Disposal is subject to the approval of Rank shareholders at theExtraordinary General Meeting. A circular setting out the notice of theExtraordinary General Meeting, including the Rank directors' recommendation tovote in favour of the Disposal is expected to be sent to Rank shareholdersshortly. The Disposal is also conditional, amongst other things, upon obtainingclearances from the US, Canadian and Spanish anti-trust authorities. The Disposal is expected to be completed in early 2006. Information on Deluxe Film Deluxe Film is one of the world's leading suppliers of products and services tothe motion picture industry. Deluxe Film's activities are organised into twocomplementary activities, film processing and creative services. For the year ended 31 December 2004, the financial statements of Deluxe Filmwere prepared under UK GAAP. In this year, Deluxe Film generated profits beforeinterest and taxation of £52.9 million on sales of £366.0 million. As at 31December 2004, Deluxe Film had net assets of £277.3 million, net of intercompanypayables of £111.6 million and gross assets of £571.5 million. The unauditedresults of Deluxe Film for the six months ended 30 June 2005 were prepared underIFRS. In this period, Deluxe Film generated profits before financing costs andtaxation of £30.2 million on sales of £201.7 million. As at 30 June 2005,Deluxe Film had net assets of £348.2 million, net of intercompany payables of£145.3 million and gross assets of £605.3 million. Enquiries: The Rank Group Plc Tel: +44(0) 20 7535 8031Dan Waugh (Director of Investor Relations) Tel: +44(0) 7799 581763 Goldman Sachs International Tel: +44(0) 20 7774 1000Nick ReidNick Harper Maitland (Press enquiries) Tel: +44(0) 20 7379 5151Angus Maitland Tel: +44(0) 7785 268283Annabel Tuck Tel: +44(0) 7932 774335 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. Goldman Sachs International, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Rank inrelation to the matters described in this announcement and is not advising anyother person and accordingly will not be responsible to any person other thanRank for providing 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 INFORMATION In 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 Deluxe Film has been extractedfrom the audited financial statements of Rank for the relevant financial year. An exchange rate of GBP/US$ of 1.74 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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