Stanley Leisure links with Malaysian partner

It is a bold gambler who places a bet before knowing all the rules of the game he is playing. But that is what Genting of Malaysia did on Monday when it linked with Stanley Leisure, Britain's largest casino operator.

The deal is meant to capitalise on the government's gambling deregulation legislation. Yet the final shape of this is still not entirely clear.

The two are forming a joint venture to build and run some of the eight regional casinos and super-leisure complexes that the nanny government plans to permit initially, while it and the Daily Mail determine whether this runs the risk of turning us into a nation of problem gamblers.

Genting, which previously held a small stake in Stanley, is now increasing this to 10.2 per cent, largely through a £36m purchase from Lord Steinberg, the company's founder and chairman. Stanley is also buying a 50 per cent stake in the Genting-owned Maxim casino in London.

The link has advantages for both sides. Genting gets a stake in UK casino deregulation - assuming it goes ahead - and a strategic stake in Stanley for a not huge outlay. The joint venture will have an option over Stanley's site next to Leeds United's football ground, a prime candidate for a northern regional casino.

Stanley, which lacks experience of super-casinos, gets more financial fire-power and a partner with experience of designing them and managing vast numbers of slot machines. Genting's Highland Resort Casino in Malaysia has more than 400 gaming tables, 3,000 slot machines and 10,000 bedrooms.

With the world's gaming groups jostling for position ahead of UK deregulation, Stanley will have attracted a lot of suitors in recent months. Some will argue it might have done better with one of the large Las Vegas operators. But some of the biggest of these have already set up shop in the UK, and the second-rank Americans might not make such attractive partners as Genting.

But while the deal pushed the shares up on Monday, it will also kill speculation about a bid for Stanley soon. A standstill agreement prevents Genting from selling its stake for two years, or bidding for three years without a board recommendation or rival offer. Still, with a 15 per cent stake in London Clubs International, it could play an interesting role in any post-legislation industry consolidation.

The fact that Lord Steinberg was willing to sell such a large slice of stock (while retaining 14.4m shares) at 450p suggests the upside beyond that price may be limited in the near future. Certainly, at nearly 17 times 2005 earnings, the Stanley share price seems to be gambling on a lot of deregulation benefits.

The bane of Sarbanes

America's Sarbanes-Oxley corporate governance legislation is starting to have a significant knock-on effect for UK companies - possibly greater than is appreciated.

Sir Christopher Bland, chairman of BT Group, this week came out and criticised it as excessive, costing the company £10m a year. He said BT would have delisted from America if it had had the option.

The main focus of corporate attention has been on the legislation's section 404, which requires managements to state, in year-end filings, the adequacy and effectiveness of their internal controls over financial reporting.

But as Independent Audit, a City governance consultancy, points out in a briefing note published today, Sarbanes-Oxley also changes a lot of US audit committee practices, which UK companies with a US legal exposure cannot ignore.

One of the most fundamental shifts is that the external auditor now reports directly to the audit committee, even though the chief financial officer remains its main contact on a day-to-day basis.

This has numerous practical implications. Among them, Independent Audit suggests the audit committees of large UK companies should be thinking about setting up dedicated secretariats to help their non-executive directors, who are increasingly finding themselves with too much work.

The proposal shares some common ground with an idea raised in this column in recent months - that non-executives could do with help ensuring that they are getting the information flows they need from executive directors.

Some have suggested this could take the form of a completely independent non-executive secretariat, but that seems a non-runner, since it could fatally divide boards into "them" and "us". Others think the problem could be solved by simply strengthening support for non-executives within the company secretary's office - as seems to be the case at BP.

But there is a lot to be said for using Sarbanes-Oxley to locate a secretariat within the audit committee. Given the strictures of the legislation, audit committee members can present requests for information not as a challenge to management but as a vital element in protecting themselves and the company's reputation.

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