A low-grade offer and stagnant cash could be enough to spark interest

 
Elizabeth Fournier
THOUGH the offer from Guoco is seen as benign, the attention is likely to reignite interest in Rank as a takeover target – particularly after 2011 figures so far showed a two per cent rise in revenues year on year.

The double whammy of the smoking ban and the introduction of new Gambling Act provisions in summer 2007 weighed heavily on the group, and a profit warning in October that year sent shares tumbling.

But though Rank has lost more than half its market value since 2007, fortunes seem to be on the up.

In particular, concentrating on its core gambling businesses seems to have paid off – profit forecasts were topped this year despite a poor performance in Spain.

Rank is also building up reserves. After a tax rebate of £154m in March, the company has the firepower to expand, but is likely to wait for the outcome of an appeal in 2012 before spending any cash.

Despite a recovery in its share price over the past 12 months, Rank is still underperforming the leisure industry. Add that to an increasing cashpile, and the company is becoming an attractive prospect for suitors.

Investors would be wise to commit now before speculation drives prices higher.