An obligatory offer by Malaysia’s Guoco Group for U.K. gaming operator Rank Group has stunned industry-watchers by succeeding.

Last month, Guoco ended up with a majority of Rank shares when enough shareholders decided to accept its offer of 150 pence a share to bring its stake in the company to 56 percent.

In May, Guoco bought an 11 percent stake in Rank from Genting, which raised Guoco’s holding to 41 percent. That triggered a mandatory bid from Guoco.

At the time, Guoco maintained that the bid was not hostile, and that the offered price of 150 pence per share merely was presented to satisfy legal requirements.

In its response to the situation, the Rank board released a statement.

“The board continues to believe that Guoco Group’s final offer of 150p per share substantially undervalues Rank and fails to reflect its underlying value and prospects, including the significant potential upside related to VAT claims,” the statement said.

“Rank is an excellent business with strong market positions, trusted brands and a clear strategy that is generating value for shareholders through achieving sustainable growth in earnings and dividends.

“The board remains fully committed to delivering greater value for all shareholders through the strategy set out in its circular to Rank shareholders.

“Accordingly, the board reiterates its recommendation to shareholders that they do not accept the offer and should take no action.”

On the subject of VAT claims, which are expected to provide Rank with a large sum of cash, the board release said, “By the end of the year, Rank expects the appeals process regarding the retention of VAT proceeds of £275 million to be completed. Rank has also submitted further VAT claims for at least an equivalent value to the proceeds already received, and Rank expects that these claims will be considered over the next two to three years.”

The Financial Times reported that although investors might be expecting to see some of the refunded VAT money, some analysts believe that Guoco could use its influence to keep the money in the company until a future delisting.

“It’s a sorry mess,” said one analyst.

For its part, Guoco is remaining positive. The company released a statement that said, “Guoco looks forward to continuing its productive relationship with Rank and the continued growth and development of Rank’s business.”

By GGB Staff

Staff writers for Global Gaming Business magazine. Las Vegas, Nevada.