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UK leisure company Rank Group plc announced plans Dec. 7 to sell Hard Rock Cafe International Inc. to Florida's Seminole tribe for $965 million, hedging its bets on, among other things, bingo. But, trying to throw a wrench in the deal plans is losing bidder Cordish Co., which, along with Power Plant Entertainment LLC, has filed a lawsuit accusing Hard Rock management and Seminole of collusion and bid rigging.
According to a Cordish press release Jan. 2: "The lawsuit charges that Hard Rock USA President and CEO Hamish Dodds and others began conspiring with the Tribe months before Rank announced it would seek bids for Hard Rock in exchange for the Tribe agreeing to keep Hard Rock USA management in place if it was the successful bidder." Further, the suit claims that on two separate dates in September, two different Cordish VPs approached Rank financial adviser Merrill Lynch & Co. "to request the Hard Rock offering prospectus and were told both times that Hard Rock senior management had specifically instructed Merrill not to provide Cordish with offering documents, and that Rank would not consider a bid from Cordish." A Rank shareholder vote on the deal is set for Jan. 8 and for now, the beat goes on. ALL OR NOTHING As it stands now, Rank will hang onto the Hard Rock's iconic London location but reportedly plans to - gasp - rebrand it, 35 years after what it calls two "enterprising and music-loving Americans" had a vision, or so the song goes... Rank is sharpening its focus on gaming, a hot segment in both the U.S. and Europe these days, selling, in addition to Hard Rock, its Pennsylvania-based vacation unit Resorts USA Inc. to management for $32 million, and its Deluxe Media Services business to Optical Disc Service GmbH for $1.7 million. The company's other holdings include Mecca Bingo, which it says is the U.K.'s No. 2 bingo club operator, Top Rank Espana, another bingo outfit in Spain, Grosvenor Casinos, with locations across England and Scotland and U.K.-based interactive gaming site Blue Square. THE END OF THE SONG The owner, however, won't part with the famed restaurant's original outpost, in London, which opened its doors to Rock 'n' Roll lovers in 1971 and drew, so it says, "droves of customers with its first-rate, but moderately priced casual American fare." According to the Associated Press, however, the company plans to warp it under the "Rank Gaming brand." In 1982, the Hard Rock's two founders, Isaac Tigrett and Peter Morton, began expanding into major U.S. cities, as well as Paris and Berlin. Tigrett sold his holdings to Mecca Leisure, a company the Rank Group snatched up in 1990. Rank then expanded its ownership, acquiring Hard Rock America from Morton, for $410 million in 1996, the AP said, and Hard Rock Canada from owner Nick Bitove, according to the chain's Web site.
The Rank-owned Hard Rock business, which consists of 124 restaurants, as well as hotels, casinos and two concert venues, went on the block in July and, according to Reuters, piqued the interest of such bidders as private equity firms Apollo Management LP, Permira, TDR Capital LLP, and Pilot Group, the investment outfit of Robert Pittman, an MTV co-founder. The eventual buyer, the Seminole tribe, owns hotels, casinos and resorts in Florida, including two Hard Rocks.
Regardless, the outcome of the auction, wrote The Deal's Phineas Lambert Dec. 7, "fell short of some investors' expectations, particularly given the unfavorable exchange rate impact on the sterling value of the deal, which equates to about £490 million." Rank, which has publicly aired grievances this year with a smoking ban in Scotland, claiming it has hurt business at its bingo halls, will return the majority of proceeds from the Hard Rock sale to the investors and use the rest to pay down debt. GETTING THE BLUES Elsewhere, dealmakers have recently made music, some with seemingly sweet songs and some hitting sour notes. In July, Live Nation Inc. agreed to pay Ares Management LLC and other private investors $350 million cash for HOB Entertainment Inc., the operator of the House of Blues nightclubs.
In September, Biloxi, Miss.-based Hard Rock Hotel & Casino's parent, Premier Entertainment Biloxi LLC, made its way to bankruptcy court with hopes of collecting $151.6 million in insurance, one year after Hurricane Katrina devastated the area. AND THIS WEEK IN ROCK 'N' ROLL... But setting aside happenings in the M&A world, Hard Rock reminds us that in this, the same week that it was sold, such memorable events shaped the world of Rock 'n' Roll, including:
—Carolyn Murphy
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