Potential London Clubs deal sparks controversy

Tuesday, Dec. 3, 2002 | 10:47 a.m.

SUN STAFF AND WIRE REPORTS

LONDON -- The London Stock Exchange is considering launching an investigation into irregular trading in London Clubs International shares after the price rose by 40 percent in the two weeks before the company received a bid from rival casino operator Stanley Leisure, the Independent newspaper reported today.

London Clubs is best known in Las Vegas as co-developer of the bankrupt Aladdin resort on the Las Vegas Strip.

The LSE has been looking closely at unusually heavy volume in the trading of London Clubs shares. It may pass the case on to the Financial Services Authority to investigate whether individuals in the market knew about and were acting on the potential bid by Stanley Leisure.

Stanley Leisure confirmed Monday "it has held some discussions" with other parties about the possibility of making an offer for LCI, which owns a string of prestigious casinos including 50 St James.

Stanley Leisure has prepared its informal offer in conjunction with venture capitalist Hg Capital, which would take on some of LCI's casinos and would hand them over to be run by former LCI chief executive Alan Goodenough.

The Independent reported that LCI said there had been "abnormally high" levels of trading in its stock in the past two weeks, but added: "The first we knew about the Stanley Leisure interest was when we picked up the papers on Sunday."

In the meantime, Goodenough's involvement has displeased a number of LCI's shareholders, several British media outlets reported.

The shareholders are unhappy because he presided over the company's money-losing investment in the Aladdin resort.

The failed Aladdin investment effectively transferred ownership of London Clubs from shareholders to the Bank of Nova Scotia, the Guardian newspaper said.

As well as having an uneasy relationship with Goodenough, the LCI board is understood to be wary of opening its books to a competitor such as Stanley in a due diligence process, the Guardian said.

But with Bank of Nova Scotia probably calling the shots, LCI management and shareholders are unlikely to have much say over whether the Stanley deal gets the go-ahead, the Guardian said.