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The Rank Group on Wednesday completed the long-awaited sale of its film processing division, leaving it more focused on its gambling and leisure businesses but also raising market expectations that it may be vulnerable to takeover approaches.

The Deluxe Film business was sold for $750m to MacAndrews & Forbes, the holding company for Ronald Perelman, the US billionaire who also holds controlling stakes in Revlon cosmetics and Panavision, the film equipment rental company.

Selling the cash-generative division will dilute earnings and leave Rank?s dividend uncovered, and the group admitted its dividend policy and capital structure were ?under review?. It plans to announce a return of capital to shareholders with its preliminary results on March 3 but would not elaborate on how much money it might hand back or by what means.

The owner of the Mecca bingo and Hard Rock Cafe chains has not commented on a recent report of abortive merger negotiations with William Hill, but its shares have risen by 20 per cent since August amid growing takeover speculation. Analysts said on Wednesday that the sale of Deluxe could make a bid from a trade rival or private equity group more likely, although they cautioned that the rise in its valuation could deter many bidders.

Rank would not say by how much it expected earnings to fall as a result of the sale, but Joseph Thomas, an analyst with Investec, said yesterday he expected to lower his forecast for 2006 pre-tax profits from ?173m ($298m) to ?134m. This would cut earnings per share estimates from 20.2p to 15.5p, threatening the 5 per cent dividend yield on Rank?s shares, he said.

In 2004, the division made profits before interest and taxation of ?52.9m on sales of ?366m. Its film processing and distribution business, the world?s largest processor of 35mm film for studios and the largest distributor to cinemas, has been declining but it has expanded its small creative services operation, which includes digital compression and encoding technology. ?Deluxe is a terrific business and a world-class brand,? Mr Perelman said. ?We are excited about the future of the business and its proven leadership team.? Deluxe?s management team, led by Cyril Drabinsky, will continue to run operations ?without interruption?.

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