Inside Track by Katherine Doggrell
Putting your eggs in multiple baskets in case of unforseen trips and falls is received wisdom in daily life, but the drive to diversity is receding in the corporate world in favour of specialisation.
Whitbread has been the subject of much break-up speculation over the past six months, and is now shifting its focus towards Premier Travel Inn, the budget hotel brand, and its Costa Coffee brand.
Rank Group has also sought to reduce criticism that it is an unwieldy conglomerate and has sold the majority of its Deluxe Media and Film divisions, its Butlins holiday camp business, Tom Cobleigh pubs and Odeon cinemas.
On Friday the group announced that it was following the current industry trend towards sale and leaseback deals, with a £172m deal on 40 bingo clubs and four casinos.
The agreement, with joint venture Earth-Solarus, should see the company book a £53m pre-tax profit, money which will be used to pay down debt. The deal will also ease the group's dependency on the bingo business, which is expected to suffer in the wake of next year's anticipated smoking ban in England.
Earlier this month the group said that Scotland's smoking ban had caused a 14% drop in bingo revenue at the company's Scottish sites.
It is now reviewing the future of its Hard Rock division as it turns attention to its Grosvenor casinos and Mecca bingo clubs. Merrill Lynch is advising Rank on this review, which is expected to be completed within a "few months".
It is estimated that, if sold, the division could raise between £450m and £550m.
At Hard Rock, the estate currently includes 68 company-owned cafes, 53 franchises, and six Hard Rock hotels and casinos, across 40 countries.
The group also has a joint venture with Sol Meliá, the Spanish hotel group, to develop Hard Rock hotels in North America and Europe. The first hotel opened in Chicago at the beginning of 2004, with further hotels are planned for New York, Madrid and San Diego.
In the half-year to 25 June, the group saw a 8% rise in revenue at company operated cafes, and, as an additional lure to potential buyers,Hard Rock includes a collection of rock'n'roll memorabilia, which The Guardian has estimated could be worth around $900m (£486m).
Since acquiring the brand in 1990 as part of its acquisition of Mecca, Rank has seen it suffer varying fortunes as it fell in and out of fashion, but with the brand now on the rise again and promising growth anticipated in the relatively new hotel division, Hard Rock is an attractive proposition.
Rank is rumoured to have received a number of approaches from private equity groups, so if it decides on a sale it should see a good price from a competitive auction.
The move would be similar to that followed at the end of last year by Hilton Group, which sold Hilton International to focus on its bookmaking chain, changing its name to Ladbrokes in the process.
Recent changes in gaming legislation gave Ladbrokes the chance to expand, conditions that Rank would also be able to benefit from.
Upon separation, Rank, like Ladbrokes before it, would quickly find itself under pressure to consolidate within the sector. Some commentators have suggested that Ladbrokes itself may make a move on the group.
Rank's move away from diversity to specialisation could eventually see it streamline itself out of the market altogether - a gamble that it increasingly looks prepared to make.
Katherine Doggrell is editor of Hotel Report
