Rank sells film distribution unit to Carlton for pounds 65m

Rank sold its film distribution arm to Carlton yesterday for pounds 65m, towards the top end of expectations for the division which had been up for sale since February.

However, Rank won't give up its trademark "man with the gong" logo, but will license it to Carlton for use in opening sequences of the films in the library. Rank is also hanging on to its film delivery service.

Shares in both companies rose after the announcement, which gives Carlton a library of 740 feature films and increases Rank's focus on its core leisure operations.

Rank Film Distributors' extensive collection of films spans more than 60 years of British cinema and includes Oscar-winning classics such as Brief Encounter and The Lady Vanishes. Other well-known films in the portfolio are Laurence Olivier's Shakespeare epics Hamlet and Henry V. Carlton will also gain control of popular favourites such as the Carry On series, Reach for the Sky, The Ipcress File and Oliver Twist.

Rank said two months ago it planned to sell its film distribution arm in a bid by the new chief executive, Andrew Teare, to focus on the group's core leisure businesses that include the Hard Rock cafes, Butlin's holiday camps, Tom Cobleigh pubs and Odeon cinemas.

Carlton said it would distribute the films acquired from Rank with its existing library of movies and TV programmes. The film library would also be a boon for the film channel it planned to launch on digital television, it said.

Carlton, largest of Britain's 15 commercial television stations, broadcasts to 22 million people in London and Birmingham. In February it joined BSkyB and Granada in a venture to bid for licences to operate digital television stations from mid-1998.

The film business made operating profits of pounds 4.1m on sales of pounds 25.4m in 1996 and had assets of pounds 31.3m. Analysts had expected the division to raise between pounds 50m and pounds 70m after the company poured cold water on earlier estimates that it might be worth up to pounds 150m.

As part of its reorganisation, Rank has already raised about pounds 300m from the sale of businesses including its engineering division and the Shearings bus holiday operation. It still plans to sell its stake in the Rank Xerox office equipment venture,worth an estimated pounds 930m.

The sale of the film distribution arm is the latest move in an increasingly urgent attempt to inject some sparkle into one of the great names in the British entertainment industry which in recent years has lost its lustre. When Mr Teare arrived from English China Clays a year ago he found the group in less robust shape than he had believed and he has struggled to gain the support of the City which has marked Rank's shares lower ever since his arrival.

They closed yesterday 7p higher at 427.5p, but they have fallen from a high of 545p soon after Mr Teare arrived last spring. Carlton's shares ended 3.5p higher at 519.5p.

Mr Teare has not been idle, spending more than pounds 400m on acquisitions - even more than he has raised from disposals - reappointing three of four divisional directors and revamping the group's accounting policies.

Despite all that, however, Rank's return on capital remains well below target.