Ladbroke Group PLC

87 Wimpole Street
London W1M 7DB
United Kingdom
(01) 935-2853

Public Company
Incorporated: 1967
Employees: 65,000
Sales: £2.8 billion (US$5.01 billion)
Stock Index: London

Since Ladbroke Group was founded more than one hundred years ago as a small agency to handle the horseracing bets of England’s high society, it has grown from a simple partnership between a horse trainer and a friend to become one of the world’s leading companies in the hotel and leisure industries. Named for the village where it was first established, Ladbroke today concentrates on real estate development, hotel management, commercial racing and off-track betting, and retailing.

Because its betting activities were illegal under British law but permitted on an unofficial basis, Ladbroke maintained a very low profile for almost 70 years. In 1957 it was acquired by a group of investors led by Cyril Stein, its current chairman. Spurred by the legalization of off-track betting in 1963, the size of Ladbroke’s racing subsidiary increased significantly in order to reach beyond the upper classes to all who wanted to try their luck at picking a winner. In 1967 the company went public, offering its shares for sale on the London Stock Exchange, and by 1971, the company owned and operated 660 licensed betting shops in the United Kingdom.

Although its betting operations assured Ladbroke of a fairly steady cash flow, Stein knew that Ladbroke also needed to build strong assets as a base for future growth. Applying the expertise they had gained in the racing business, Stein and his management team embarked upon a diversification strategy that took the company beyond horse betting into the property-development and hotel industries.

Through its 1972 acquisition of the London & Leeds Development Corporation, Ladbroke aggressively entered the real estate market with office projects in the eastern United States as well as in Paris, Amsterdam, and Brussels. Property development activities in the United Kingdom led to the formation of four other subsidiaries: Ladbroke Group Properties, handling commercial and residential projects in and around London; Ladbroke City & County Land Company, to oversee local and out-of-town retail projects; Gable House Properties, the largest operator of retirement and nursing homes in the country, acquired in 1986 to develop commercial, residential, and retail properties; and Ladbroke Retail Parks, for the construction of retailing centers outside of London.

Ladbroke entered the lodging business in 1973, when it opened three moderately priced hotels which quickly grew into a profitable chain throughout the country. The success of this venture and the continuing health of Ladbroke’s betting and real estate operations helped the company weather the severe losses it incurred during a short-lived entry into the casino business. Casinos, which Ladbroke had hoped might be a lucrative adjunct to its hotel business, were abandoned in 1979 after the company lost its license in a highly publicized case in which it was found guilty of violating government gaming regulations.

Three years later, Ladbroke capitalized on an opportunity to expand its racing operations into Belgium. With the 1984 acquisition of Le Tierce S.A., a chain of Belgian betting shops, Ladbroke rapidly established itself as a leading force in that country’s racing industry. Although a plan to purchase the Arizona-based Turf Paradise racetrack fell through in that same year due to problems with obtaining state regulatory approval, Ladbroke successfully acquired the Detroit Race Course at the beginning of 1985 and took the first step toward making its presence felt in U.S. horseracing.

Further expansion in the European racing market occurred in April, 1986 when Ladbroke was awarded exclusive rights to open off-track betting shops throughout the Netherlands. That year also saw the company pursue a new avenue for growth in the retailing area by purchasing the Home Charm Group PLC, a leading chain of over 100 do-it-yourself stores operating throughout the United Kingdom under the Texas Homecare name.

The company’s growth has been marked by expansion and acquisition in some areas balanced by consolidation and divestitures in others. As part of a strategy intended to eliminate involvement in markets in which Ladbroke did not hold a major position, the company sold a number of businesses grouped under its entertainment division in 1986, including Lasky’s, a chain of consumer-electronics stores, as well as amusement arcades, bingo halls, and local newspaper-publishing operations, while retaining more profitable ventures in magazine publishing and cable television.

That accomplished, the, company turned its attention to establishing a more contemporary and stable image. Ladbroke instituted several measures intended to upgrade the public’s perception of off-track betting parlors, such as adding snack bars and live television. Ladbroke also joined with three other major bookmakers in 1986 to form Satellite Information Services (SIS), a television communications company set up to transmit horse and greyhound racing directly to Britain’s off-track betting shops.

The bookmakers’ involvement in SIS prompted an investigation by the government’s Office of Fair Trading (OFT) into possible conflicts of interest. The government was particularly concerned about the bookmakers’ influence on the SIS system and their potential for creating a monopoly, but also about their power to shift attendance away from the racecourses to off-track shops and thus affect the odds determining payouts for winning bets. A second investigation resulted from similar concerns over the bookmakers’ power expressed by the National Greyhound Racing Club. Ladbroke’s share in SIS, which was larger than those of the other investors, made it a primary target of the investigation.

At the same time, Ladbroke brought a suit before the High Court in which it accused the Extel communications group of starting a series of false rumors about the company which had caused a run on Ladbroke shares, reducing the company’s value by £200 million in only two days. Ladbroke argued that Extel, which operated a competitive sports-information service, had sought to sabotage the first public offering of SIS stock by simultaneously releasing several damaging reports, including a rumor that Cyril Stein had resigned and implications of improper relationships between prominent racing individuals. The rumors were never substantiated and the OFT investigations ultimately yielded no evidence of wrongdoing on Ladbroke’s part.

Although Ladbroke had become the second-largest operator of hotels within its own country by the late 1980s, it had not yet achieved a worldwide reputation in the lodging industry. If anything, its recent sale of the Parkmount Hospitality Corporation and the Dallas-based Rode way Inn organization to Ramada, Inc. had reduced the company’s reach and influence outside the United Kingdom. That all changed in 1987 when Ladbroke successfully acquired the 91-hotel Hilton International chain for more than $1 billion from Allegis Corporation. Ladbroke’s bid for Hilton, which beat out several other heavyweight bidders, represented its second attempt in two years to purchase the hotel chain. The first had fallen short when Hilton’s previous owner, Transworld Corporation, turned Ladbroke down in favor of an Allegis bid of higher value. This time, however, Stein used a three-week time limit to pressure Allegis to accept the Ladbroke offer immediately instead of waiting for the other bidders to receive approval from their respective governments.

The Hilton International purchase made Ladbroke one of the largest hotel operators in the world, with a presence in 44 countries, including the U.S., where Hilton’s six Vista International hotels joined the Ladbroke fold. It also gave the company a 50% share in Hilton’s advanced reservation system, which Ladbroke viewed as an important link to travelers around the world. One year later, Ladbroke upgraded and renamed most of its original hotels in the United Kingdom, reintroducing them as part of the Hilton National chain.

Meanwhile, technological enhancements such as a full-color electronic showboard and new Gold Star shops, with services appealing to a wider range of customers, were introduced to maintain Ladbroke’s position as a leader in racing and off-track betting. Its presence as the only British betting company operating in the United States expanded too: Ladbroke obtained a license to conduct off-track betting in Wyoming, acquired The Meadows racetrack in Pittsburgh in 1988, and purchased San Francisco’s Golden Gate Fields in 1989. Ladbroke also acquired a major competitor in the U.K., Thomson T-Line and its Vernons pools operation, that same year, increasing its share of the betting business in the United Kingdom.

Today Ladbroke’s hotels account for the largest share of the company’s business activity. Since the Hilton acquisition, Ladbroke has opened more than 13 new, four-star hotels around the globe and has many others under development. It also operates numerous holiday villages and health and leisure clubs within the United Kingdom, and the Comfort Hotel chain throughout Europe. New properties are planned for commercial-office and retail-shopping projects both in the United Kingdom and in the eastern United States. More than 50 new outlets have been added to the Texas Homecare operation since 1987, which is the second-largest do-it-yourself retailer in the United Kingdom with 200 stores, while Ladbroke’s racing business continues strong with 1,800 retail betting shops throughout the United Kingdom.

The company credits its success to both good timing, which has allowed it to capitalize on lucrative opportunities, and a hands-on management style which gives operational responsibility to senior executives. Many business analysts also note Ladbroke’s ability to rebound from potentially devastating incidents, such as the 1979 casino scandal, with its reputation largely intact.

Ladbroke may face significant obstacles to growth in the racing industry in the United Kingdom. Domestic concerns over the racing industry’s financial health raise the possibility that government-imposed restrictions and additional levies may redirect a greater portion of bookmakers’ profits toward racecourse rejuvenation.

Ladbroke management will also be challenged to overcome intensified competition in its other core businesses. It will have to improve productivity and contain costs without sacrificing the quality of its services or the systematic planning which has contributed to its successful development to date.

Principal Subsidiaries

Hilton International Co. (USA); Ladbroke Group Properties Limited; London & Leeds Corporation (USA); London & Leeds Estates Limited (87%); Ladbroke Group Homes Limited (75%); London & Leeds Investments (Belgium) SA (77.5%); London & Bardco Investments (Paris) SA (50%); Ladbroke Racing Limited; Ladbroke Racing Corporation (USA); Tierce Ladbroke SA (Belgium); Ladbroke Racing International BV (Holland); Texas Homecare Limited; Multicolor (Wallpapers) Limited; Retail Parks Limited; Ladbroke Group Finance PLC; Town and County Factors Limited; Ladbroke Hotels Limited; Ladbroke City & County Land Company Limited (90%); Gable House Properties PLC; Gable House Estates Limited (75%); Gable Retirement Homes Limited (85%); Ladbroke & Co. Limited; Ganton House Investments Limited; Home and Law Magazine Limited (87%); CableTel Communications Limited (75%); Ladbroke International SA (Belgium).