Rank to sell Hard Rock to Seminole Tribe

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LONDON - Britain's Rank Group said on Thursday it had agreed to sell its Hard Rock cafe and casino business to the Seminole Tribe of Florida for $965 million.

Rank said the disposal of the rock music-themed chain would turn it into a pure gaming group, focusing on Britain's plans to open up its casino market from next year.

But analysts said it had sold the division too cheaply, after the price was hit by the weakening dollar, and Rank's shares fell. Analysts were also unimpressed by the scale of Rank's plan to return some of the sale proceeds to shareholders via a 65 pence-a-share special dividend.

Rank Chief Executive Ian Burke said, "Our strong portfolio of gaming assets will enable us to take advantage of the long-term growth in the gaming market."

Rank has shed British household names like Butlins holiday camps, Odeon cinemas and Pinewood film studios in a drive to get rid of its image as an old-fashioned conglomerate.

Seminole Gaming, the main revenue earner for the Florida tribe, plans to expand the hotel and cafe business through key gateway cities around the world, and hopes to expand Hard Rock casinos internationally, but not in Britain.

"We realize the power and longevity of this brand," Seminole Gaming Chief Executive Jim Allen told Reuters.

Gaming brings in about 90% of the revenues of the Seminole Tribe, which also produces citrus fruit, cattle and tobacco. Nearly 3,300 Seminole Indians live in Florida reservations, descendants of a few hundred that escaped U.S. government attempts to relocate them in the mid 1800s.

The tribe is already involved with Rank, managing two Hard Rock casino-hotels in Florida.

Thursday's deal includes 124 Hard Rock Cafes, as well as hotels, casino hotels and two Hard Rock Live! concert venues. It also includes Hard Rock's collection of rock memorabilia, which fronts its cafes -- including a David Bowie Fender guitar and Madonna's black lace bustier.

"There was a significant amount of interest, a significant number of parties," Burke said of the Hard Rock auction.

But Rank shares fell 4.6% to 254-1/4 pence by 1229 GMT, valuing the group at around 1.4 billion pounds.

Morgan Stanley analyst Lou Pirenc said the sale proceeds of 460 million were well below his estimate of 593 million and the deal was 8% dilutive to earnings per share.

"Rank will return 350 million pounds to shareholders, which is likely to disappoint the market, which had expected that all of the proceeds would be returned," he said.

A source close to the deal told Reuters the value of Hard Rock had been eroded in recent weeks by the weakening of the dollar.

"There were many dozens of groups interested, from the U.S., from Europe and Asia, from the gaming sector and restauranteurs and robust interest from private equity," said the source.

Analysts at ABN Amro said: "The bulls will argue that such disposals put Rank even further in play (as an) industry consolidation target."

Merrill Lynch was lead adviser to Rank on the deal.

Rank said group revenues had grown slightly in the 48 weeks to November 26, but Scotland's smoking ban in March had cut bingo revenues there by 15%.

"We do expect a similar impact in England and Wales," Burke said of a smoking ban planned there from the middle of next year.

Rank also said it had appointed Peter Johnson, chairman of Inchcape, as its new chairman to succeed Alun Cathcart who retires from the board at the end of February.
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