Rank Group Feeling Blue

Rank Group will start a thorough evaluation of its online sports betting arm Blue Square Bet according to a statement released today. The subsidiary also offers casino and slots games online, as well as being a chief sponsor of UK non-League football.

The UK based gaming and betting company bought Blue Square Bet in 2003 for GBP 63 million (EUR 77 mln) and that investment is still far from paying off. Indeed, it may never pay off, considering that Blue Square Bet is far from being the first choice for internet betting in the UK and keeps generating significant losses.

Although the subsidiary’s revenues showed some modest increase in 2012, it took some heavy investment into advertising for that to happen. Adding to it the GBP 3.5 million (EUR 4.3 mln) ongoing spending on its sports product upgrade, profitability is hardly a short term prospect for Blue.

Rank is headquartered in London and operates scores of bingo clubs and casinos under UK gambling laws, though its majority owner is investment holding Guoco Group from Malaysia (itself a Hong Leong subsidiary).

Rank’s brands Grosvenor and Mecca also run online casinos in the UK and the company’s statement appears to indicate that Blue Square will not offer that in the future. According to it “Rank intends to focus its resources on further developing Grosvenor Casino & Mecca as multi-channel brands meeting customer needs in gaming-based entertainment via venues, online & through mobile devices.”

This points to the possibility of selling Blue Square to potential investors, who may be attracted by the recent investments into the company. Rank has shed many of its subsidiaries over the last decade in a move to clarify its profile and focus purely on the gambling industry. The 888 Group is among the most likely buyers, as they already provide the technology for the book.

Should Blue Square be retained following the review, it will almost certainly be made to focus purely on sports betting, leaving the casino and slots business to Rank’s other operations. Those operations already account for 87% of the group’s total interactive revenues anyway. But a sale looks much more likely, considering that Blue Square is the only black sheep in Rank’s flock.