FRANKFURT (Reuters) - A relaxation of UK slot machine laws expected on Wednesday could trigger a widely tipped sale or break up of UK betting firm Rank (RNK.L).
Speculation surrounding the Mecca bingo, Grosvenor casino and BlueSquare.com owner has been rife ever since a trio of investors bought a third of the firm after new smoking and gambling laws sparked a 60 percent slump in the share price.
Some sort of deal looked odds-on when Rank offloaded its final salary pension scheme earlier this year. However, analysts didn’t rush to sharpen their pencils.
Two things were holding them back. The first was that the credit crunch was in full swing so the timing for an auction was rotten.
More importantly though, bingo industry insiders were expecting the government to allow bingo clubs to put back thousands of highly lucrative slot machines that the new Gambling Act had forced them to remove.
Rank’s Chief Executive Ian Burke would not have been a popular man with shareholders if he had sold the firm at a rock bottom price, only to see its profitability and value jump a few months later if and when the government delivered the goods.
They are now tipped to arrive.
Having told the Bingo Association’s general meeting earlier this year that he would deliver some “good news”, Sports and Gambling minister, Gerry Sutcliffe will finally tell Parliament his slot machine plans on Wednesday.
If the government does increase the allowance and goes along with industry recommendations the number of permitted machines could rise from 4 per club up to a maximum of around 15 based on the size of the venue.
Analysts say the 500 pound jackpot machines could be worth around 15-20 million pounds a year to Rank.
With one of its lobbying targets ticked off and with the credit crunch now losing its ferocity, Burke and Rank’s other top ranking officers may feel the time is right to hoist the for sale sign above the near three quarters of a century old business.
Analysts say Rank is worth around 70 pence a share in a worst case scenario, or up to 170 pence in a bidding war.
Some are convinced that could be on the cards. Asian gambling giants Guoco and Genting (GENT.KL) have taken 14 and 11 percent respective stakes in Rank while the Richardson family has built an 11 percent holding through derivatives known as contracts for difference.
Guoco has been gradually ratcheting up its stake in recent weeks however Genting, which owns Rank’s casino rival Stanley Leisure, has said it has no current plans to make a bid, although UK competition rules would likely prevent it anyway.
However it plays out all three are certain to have a big hand in the outcome but for its part Rank has shown little desire to deal.
It has already received -- and rejected -- a casino swap proposal from the world’s biggest casino group, U.S.-based Harrahs and snubbed an enquiry from Duke Street Capital about its Mecca bingo business.
And even if the machine decision does go the bingo industry’s way, Burke may feel the time is still not right for a sale.
Lobbyists are still battering away at politicians, trying to convince them that removing VAT on bingo cards would not only be good for government coffers but would also be a vote winner in bingo’s working class heartlands and amongst its elderly punters.
With the ruling Labour party having less than two years to save its political skin that might start to sound like a good idea.
Reporting by Marc Jones