Offer Rejection

RNS Number : 3114H

Rank Group PLC

26 May 2011

 

26 May 2011

The Rank Group Plc

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

Rank issues response document to shareholders
and recommends rejection of Guoco Group's Offer

The Rank Group Plc ("Rank") is today publishing its shareholder circular (the "Circular") which sets out its detailed response to the offer (the "Offer") posted by Guoco Group Limited ("Guoco Group") on 17 May 2011.  As stated in Rank's announcements on 9 May 2011 and 17 May 2011, the board of Rank (the "Board") reiterates its view that the Offer of 150p per share substantially undervalues Rank and its prospects, and it recommends that shareholders do not accept the Offer and should take no action.

The Circular focuses on the key reasons why shareholders should keep their shares in Rank:

Leading UK gaming business

n Excellent portfolio of assets and brands

n Strong position in fundamentally attractive markets

Established track record

n Significant progress and momentum

n Compound average earnings growth of 18% over the last two years

n Substantial value creation achieved since 2008

Opportunities for growth and value creation

n Clear focus on customer insight, capital investment and wider distribution of brands via online and mobile

n Plans to grow G Casino format from 15 to 30 sites by 2015

n Confirmation in late 2011 as to the status of the VAT proceeds of £275m received to date

n Further VAT claims with at least an equivalent value to the proceeds already received with resolution expected over the next two to three years

Financial strength to create value and deliver shareholder returns

n Cash generation and VAT proceeds have resulted in current net cash position

n Dividend reinstated; targeting level of dividend cover of 3.0x in near term

n Following clarity on VAT proceeds, Rank will move towards its capital structure policy target of around 2.5x net debt/EBITDA

In light of these compelling reasons for shareholders to keep their shares in Rank, the Board believes that Guoco Group's Offer of 150p per share substantially undervalues Rank and its prospects.

Ian Burke, chief executive of Rank said:

"Rank is an excellent business with strong positions and trusted brands in fundamentally attractive markets.  We are executing a clear strategy to generate value for all shareholders, achieving sustainable growth in earnings and dividends through building Britain's favourite gaming-based entertainment brands."

"Given our strong financial position, we believe that shareholders should have the opportunity to benefit fully from the growth opportunities available to Rank.  Fundamentally, we do not believe it is the right price at which to sell shares in Rank."

Further detail on the key reasons why shareholders should keep their shares in Rank is set out below and in a letter from Peter Johnson, the Chairman of Rank, which is contained in the Circular.

Leading UK gaming business with an excellent portfolio of assets and brands

n Rank has an excellent portfolio of assets and trusted brands with a leading position in the UK gaming market.  During 2010, Rank entertained 2.5 million customers and hosted 22.4 million customer visits. With a focus on the UK gaming market and the casino, bingo and online segments, Rank believes that it has the right foundation for an attractive long term growth strategy.

Established track record which has created value

n Rank's management team have guided its businesses through a period of challenging trading conditions and economic uncertainty, and enabled them to make significant progress. The UK businesses have momentum in their operational and financial performance and are executing a clear strategy to: improve products and services through customer insight; broaden the appeal of its land-based venues through investment and modernisation; and, widen distribution of Rank's brands via online and mobile media.  These initiatives have enabled Rank to deliver strong results in 2010 and to continue to drive impressive value creation as Rank's share price has increased by 65% over the last three years creating equity value of over £230m.

Well positioned with multiple opportunities for future growth

n Given the strength of Rank's assets and brands, and the proven track record of its businesses in recent years, Rank believes that it is well positioned for the future:

-    Clear strategy to deliver growth and value;

-    Customer insight to inspire service and product improvement;

-    Capital investment to extend the reach and broaden the appeal of Rank's brands, particularly through the further expansion of the G Casino format;

-    Wider distribution of Rank's brands via online and mobile media;

-    Option over international expansion;

-    Evolving nature of the regulatory environment; and

-    Significant upside from confirmation of VAT proceeds received to date and further VAT claims that have yet to be settled.

Rank believes that these opportunities are achievable and valuable, and that shareholders will benefit from them if they retain their shares in Rank. 

Financial strength and flexibility to create value and deliver shareholder returns

n Through a combination of the substantial cash flow generation within its businesses and the proceeds of several VAT claims, Rank has managed to reduce significantly its level of debt in recent years.  This improvement in financial strength has given Rank the flexibility to continue to invest in its businesses and to deliver attractive returns.

n It has also allowed Rank to reinstate its dividend and to pursue a progressive dividend policy with a target level of dividend cover of 3.0x over the near term.  By the end of the year, Rank expects the appeals process regarding the retention of VAT proceeds of £275m to be completed. Once clarity is received Rank will seek to move towards its capital structure policy target of around 2.5x net debt/EBITDA.  This will be achieved through considering further investment in Rank's businesses, growing returns to shareholders and, where appropriate, strategically and financially attractive acquisitions.  Rank has also submitted further VAT claims for at least an equivalent value to the proceeds already received and Rank expects that these claims will be considered over the next two to three years.

In light of these compelling reasons for shareholders to keep their shares in Rank, the Board believes that Guoco Group's Offer of 150p per share substantially undervalues Rank and its prospects for the following reasons:

n The Offer implies a valuation for Rank equivalent to a low point of its valuation rating over the last three years and a significant discount to Rank's historical valuation metrics;

n Analysts believe that there is significant further upside in the Rank share price;

n The Offer does not recognise the substantial progress that has been made across Rank's businesses or its growth prospects; and

n Importantly, Guoco Group's Offer fails to offer shareholders any real premium for control.

The Board believes that Rank is at an important point in its development with a clear strategy, a broad range of growth opportunities and the financial flexibility to invest in its businesses and deliver attractive returns to shareholders. As a result, the Board believes that Guoco Group's Offer does not recognise appropriate value in Rank and its exciting prospects.

Further information for shareholders is contained in the circular being posted today and which will be available later today on www.rank.com.  Shareholders who do not wish to accept Guoco Group's Offer should take no action and should not sign any document which Guoco Group sends to them.

Enquiries:

The Rank Group Plc

Dan Waugh                   [phone]

Philip Munn                   [phone]

Goldman Sachs International

Nick Harper                   [phone]

Financial Dynamics

Benjamin Foster            [phone]

The Independent Directors, accept responsibility for the information contained in this document, except that the only responsibility accepted by them in respect of the information contained in this document relating to Guoco Group, its subsidiary undertakings and the directors of Guoco Group and/or any such subsidiary undertakings, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. Subject to the aforesaid, to the best of the knowledge and belief of the Independent Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of that information.

The "Independent Directors" are the Directors of Rank, whose names are set out the Circular, except for Tim Scoble.

Tim Scoble is a non-executive director of Rank and acts, and has done so since his appointment, as a representative of Guoco Group on Rank's Board. To manage this conflict of interest, Tim Scoble has not participated, and will not participate, in the Board's discussions or receive any information in relation to the Offer.  Tim Scoble does not, therefore, accept responsibility for the views and opinions of the Independent Directors of Rank in relation to the Offer as set out in this announcement.

Goldman Sachs International, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Rank and for no-one else in connection with the Offer and will not be responsible to any person other than Rank for providing the protections afforded to clients of Goldman Sachs International, nor for providing advice in relation to the Offer or any other matters referred to herein.

Under Rule 8.3(a) of the City Code on Takeovers and Mergers (the "Takeover Code"), any person who is interested in 1% or more of any class of relevant securities of Rank or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) Rank and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of Rank or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of Rank or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of Rank or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) Rank and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of Rank or a paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.  Opening Position Disclosures must also be made by Rank and by any offeror and Dealing Disclosures must also be made by Rank, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).  Details of Rank and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on [phone].

 

END

 

 

OREEAPSSAFDFEFF