Rank Group Saga Takes Yet Another Turn

Rank Group sank deeper into the mire yesterday when its top two executives resigned suddenly over the take over attempt by Guoco.  The CEO, Ian Burke, had been with the company since 2006 and his finance director, Paddy Gallagher, had been with the company since 2008.

The takeover bid by Guoco has really turned into a farce over the past few weeks.  Guoco bought shares which saw it become the major stockholder in the company with over 56%.  It also made an offer to the rest of the shareholders for 150p per share which the board originally told the shareholders not to accept.

The board commented that this vastly undervalued the group and that it also had several hundred millions coming to it from VAT returns that it had overpaid.  Indeed, Guoco has been quite sharp here since that amount of money almost equals what it had paid for the controlling interest in the company.

The 150p per share has a time limit on it and if the shareholders do not accept the offer by the cut off point, they will really be left to their own devices from then on.

The remaining shareholders had accepted the offer this month when Rank advised them to reject it on the grounds of the outstanding millions.  However, Rank then grudgingly told them to accept the offer before changing their minds yet again on Monday this week.

The whole deal revolves around whether Guoco will de-list the shares once it has its hands on enough shares.  If they do this, those shareholders who did not sell will have nowhere to turn of course.

Analysts have suggested that stockholders have three options.  The first is to reject the offer – and this they recommend; the second is that they take the offer –which obviously they say is the wrong thing to do; and third, decide whether the risk/reward needs of the stockholders are being met.  This last recommendation is inconclusive of course.

The two who resigned have done so since their positions have become too difficult.  It may be that Guoco will have more than seventy five percent of the shares in their hands by the time the offer closes on 1^st July at one o’clock in the afternoon.  If they have the required shares, it is likely that they will de-list the company from the London Stock Exchange.

Guoco insists that this is not a hostile move but with these resignations it seems likely that it was.  The stock is still trading just below the offer price.