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Rank executives quit amid takeover farce 29/06/2011
Simon Goodley
• Chief executive and finance director step down
• Board withdrew support for Guoco bid
• Uncertainty over listing continues

The farce engulfing the takeover of Mecca Bingo owner Rank Group took another twist on Tuesday when the company's two top executives both resigned suddenly.

Ian Burke, chief executive of Rank since March 2006, and Paddy Gallagher, who has been finance director since June 2008, both quit the board with immediate effect prompting the company to admit: "The board is convening urgently to discuss these latest developments with its advisers and a further announcement will be made shortly."

The dual resignation follows a bizarre takeover of the gambling group which began in May when Hong Kong investment group Guoco was forced under takeover rules to announce a £585m cash offer for the bingo and casino operator.

After shareholders surprisingly accepted the bid this month, Rank advised investors to take no action. The company then issued a statement last Thursday saying that while the offer undervalued the company, shareholders should accept it anyway, before performing a swift U-turn on Monday when it withdrew its grudging support for Guoco's bid, largely because of uncertainties about the continued stock exchange listing of Rank's shares.

Tuesday's statement added: "Following the announcement by the board yesterday in relation to the offer for the group by Guoco, Ian and Paddy have expressed to the board their view that, given the feedback received from institutional shareholders since the announcement, coupled with the advice from the group's brokers in light of this feedback as to the possible level of acceptances of the offer, it is now more than likely that the offer will result in a cancellation of the listing of Rank's shares … on the London Stock Exchange."

James Hollins, a leisure analyst at Evolution Securities, wrote in a note to clients: "Following the flip-flopping of recent days – (1) reject the Guoco bid (the 'correct' recommendation), (2) accept the bid (the 'forced' recommendation), (3) take the option that suits your risk/reward needs (the 'pragmatic' but inconclusive recommendation) – we think the CEO, Ian Burke, and CFO, Paddy Gallagher, felt their positions had become untenable, notably given there remains the risk that more than 75% of shares may be in the control of Guoco come 1pm on [the offer closing date of] Friday 1 July."

Guoco had to table its bid in May after buying an 11.6% stake in Rank from Malaysian casino group Genting when it came up for sale. The deal took Guoco's shareholding to 40.8%, above the 29.9% threshold where it had to make a bid under takeover rules. The offer to all shareholders was not expected to gain much support and Guoco's stated aim was to keep Rank's stock market listing. At the time a spokesman said: "Guoco remains very supportive of the company and its management team. This is not a hostile move."

However, Guoco has reserved the right to delist the shares if the free float – the proportion of the company it does not end up owning – falls below 25%. Rank's shareholders will not know before Friday's closing date whether the listing of Rank shares will be maintained. If Guoco decides to cancel Rank's listing then shareholders who have not accepted the 150p-a-share offer by its closure will have no further opportunity to accept the offer.

Rank shares were trading just below the offer price at around 149.76p on Tuesday morning.