The Seminole Tribe agreed to buy the Hard Rock restaurant, hotel and casino chain from Rank Group Plc for $965 million, the biggest purchase outside the U.S. by an American Indian group.
The tribe, which already owns two Hard Rock hotel-casinos, said in a statement it will fund the acquisition with debt and equity. Rank, Britain’s second-biggest casino company, is selling the unit to focus on gambling. Hard Rock owns 124 cafes, six hotels and casinos, and two concert venues.
The tribe, based near Fort Lauderdale in Florida, draws more than 90 percent of its money from gambling after opening its first bingo hall and casino in the U.S. in 1979. The sale of Hard Rock completes a six-year breakup of Rank, which hasn’t generated an annual profit since 2003.
“We think there is a tremendous opportunity to continue to expand the brand in hotels,” James Allen, chief executive officer of Seminole Gaming, said in a telephone interview.
There are potential sites for new hotels inside and outside the U.S., Allen said.
The Seminoles have seven casinos, including the two Hard Rock sites in the Florida cities of Tampa and Hollywood. Cattle ranching, the Big Cypress citrus grove, the Billie Swamp Safari and tobacco sales are among their other businesses.
The tribe’s statement said a new Hard Rock operating company will offer debt, while equity funding will come from the Seminole gaming division’s capital structure. It didn’t give more details.
Seminole History The tribe traces its history to the 1500s, according to its Web site. Almost 3,300 Seminoles live on and off reservations in Florida. They descended from a few hundred Seminoles who escaped white soldiers and settlers, fleeing into the Everglades in the 19th century.
The Seminoles were the first tribe to venture into casinos and are now one of the largest, said Joe Weinert, vice president of Spectrum Gaming Group LLC, a casino consulting firm in Atlantic City, New Jersey.
Spectrum estimates the Seminoles will record earnings of $800 million to $900 million this year, which would rank it third among publicly traded casino companies. The Seminoles do not disclose revenue figures.
“The Seminole tribe has been phenomenally successful,” Weinert said. Buying the Hard Rock “is a bold move,” he said, and the Seminoles could use the Hard Rock chain to market their casinos nationally. “They’re going to control the brand and they’ve developed a very successful model” of Hard Rock casino, he said.
Rank’s Stock Drops Rank’s stock fell the most in almost two years after the sale price disappointed some analysts. The shares slid 11 pence, or 4.1 percent, to 255.5 pence in London, giving the company a market value of 1.38 billion pounds. The stock has lost 16 percent this year, compared with a 16 percent gain for William Hill Plc and a 2.7 percent increase for Ladbrokes Plc, the world’s largest publicly traded bookmaker.
Analyst Lou Pirenc at Morgan Stanley in London, who has an “equal-weight” rating on Rank, said in a research note that his bank valued the unit at 593 million pounds ($1.2 billion).
Rank will return 350 million pounds to investors with a special dividend after the sale, the company said today in a statement. It expects the deal to be completed on March 5.
Hard Rock Hard Rock, which started with a London restaurant in 1971, had a 6 percent increase in same-outlet sales in the 48 weeks to Nov. 26, Rank said today in a statement. The division accounted for 31 percent of Rank’s sales in 2005.
Rank is selling Hard Rock to focus on its European gaming business, which includes 33 U.K. casinos, the Blue Square betting Web site and 113 U.K. Mecca bingo clubs. The U.K.
government is relaxing gaming laws by licensing more slot machines, allowing advertising and marketing of gambling, and licensing online gaming companies to draw more tax revenue.
Sales at Rank’s Scottish bingo clubs fell 15 percent since the introduction of a smoking ban there in March, contributing to a 1 percent decline in total bingo sales during the 48 weeks, the company said today.
Since 1999, Rank has sold assets including Butlins holiday camps, the Odeon cinema chain, Pinewood film studios and Tom Cobleigh pubs. The company sold its Deluxe Film unit for $750 million and two divisions of Deluxe Media Services subsidiary to Sony Corp. earlier this year.
New Chairman Rank, which hasn’t reported an annual profit since 2003, moved its headquarters to Maidenhead, England, in October as part of a bid to halt falling earnings.
“We’ve now created, we think, a very focused gaming business,” Rank Chief Executive Officer Ian Burke told journalists on a conference call. There was a “significant” amount of interest in Hard Rock, Burke said, without giving more detail. He doesn’t plan more asset sales.
Rank also said Peter Johnson will take over as chairman from Alun Cathcart, who retires at the end of February. Johnson joins the board of Rank next month. He currently chairman of Inchcape Plc.
Shares of Rank had their biggest daily gain in 14 months on Nov. 29 on speculation about a possible takeover bid. The Observer newspaper said on Dec. 3 that William Hill is considering a bid for Rank, citing unidentified analysts.
Analysts predict a bidding war as U.S. groups and Ladbrokes Plc also ponder making approaches, the newspaper said.
Merrill Lynch & Co. is acting as lead financial adviser and corporate broker to Rank and Goldman Sachs International is also providing financial advice.
