Property developer gives Rank a hand

Richardsons Capital, the UK property developer, has bought derivatives over 9.3 per cent of Rank and given its public backing to the troubled bingo and gaming group.

Lee Richardson, a director of the family-run company, said the interest had been secured using contracts for difference (CFDs). However, he added that Richardsons had the financial resources to convert the derivatives into ordinary voting stock immediately if it desired.

CFDs do not carry votes like ordinary stock but enable investors to gain economic exposure to a listed company for a fraction of the cost of buying shares. They also escape stamp duty and can be bought in size without triggering any obligation to disclose the holding.

The investment marks a welcome vote of confidence in Rank. Its shares have failed to recover after a profit warning wiped 21 per cent from its market value in October, when Rank said trading had suffered due to the smoking ban in England, and the Gambling Act's exclusion of certain fruit machines from its clubs.

A further trading update is due on Wednesday.

"I think Rank is grossly undervalued," said Mr Richardson. "It is a strong company and a strong brand. It was time to get the cheque book out. It's an investment decision and that's it."

Rank has been the subject of bid speculation since it emerged Harrah's Entertainment of the US had sought a 28 per cent stake in the company and offered its London Clubs International casino business in exchange.

It emerged this month that Genting, the Malaysian casino group that owns Stanley Leisure in the UK, had raised its stake in Rank to 9.4 per cent.

Mr Richardson said he supported Rank's management but suggested he might take a back seat in any bid situation. "I'm not looking to block anything. I'm not an awkward person. There's nothing that would or wouldn't make me [convert CFDs into the underlying stock]," he said. "We are tough but fair, we are the sort of partners people want."

Richardsons is based in Oldbury, West Midlands, and maintains an asset portfolio which it says it worth £4bn. It has built casinos and restaurants for Rank and said it has been a longstanding investor in Rank stock.

Rank declined to comment.