Stanley Leisure plc History

Company Perspectives:

The Company has pursued a focused policy of expanding its betting and gaming divisions through organic growth and a steady acquisition programme.

Key Dates:

1958:

The company is formed in Northern Ireland.

1979:

Headquarters are relocated to Liverpool.

1986:

The company is taken public.

1999:

Crockfords casino is acquired.

2003:

Star Casino opens.

Company History:

Based in Liverpool, Stanley Leisure plc is the United Kingdom's largest casino operator and fourth-largest operator of betting shops. In addition, the publicly traded company is involved in online betting and has interests in betting ventures in Italy and Bermuda. Stanley divides its business between two operating divisions: gaming and betting. The gaming division is responsible for running Stanley's 41 casinos, of which 37 are located in the provinces and four in London. The best-known casino is Crockfords, one of London's oldest and most exclusive gambling clubs. Stanley also owns the largest casino in the United Kingdom, Star City in Birmingham. The gaming division runs two online gaming businesses: www.crockfords casinos.com, taking advantage of the Crockfords name, and www.acropoliscasinos.com, which represents the combined businesses of two acquired online casinos, "Acropolis" and "Avalon." Stanley's betting division operates 600 shops under the Stanleybet banner in Britain, the Isle of Man, Jersey, Northern Ireland, and the Republic of Ireland. The shops concentrate on small wagers placed on horse racing and soccer games. The division also runs its own online sports betting site, www.stanleybet.com., which is dedicated to sports wagering as well as occasional specialty bets, such as the eventual winner of the Big Brother reality television series. Stanley's executive chairman is its founder, Leonard Steinberg.

Company's Founder Dabbles in Bookmaking with 1954 Derby

Leonard Steinberg's grandparents were Jews who escaped the pogroms in Poland and Russia during the early 20th century, settling in Manchester, England, and then Northern Ireland. Steinberg grew up in Belfast, the son of Stanley Steinberg, who owned and operated an optical manufacturing business and a milk bar in addition to running an illegal betting shop as a hobby. As a teenager, Leonard Steinberg placed an occasional bet, and when he was 18 years old he first tried his hand at bookmaking. Some school friends asked him to stake their bets on the 1954 Derby, but realizing that the bets covered only nine of the 20 horses in the field, Steinberg and a friend decided that the odds favored them taking on the risk themselves instead of placing the bets with bookies. Because only one of the horses placed and required a payout, Steinberg and his partner each walked away with more than one pound.

After this modest foray into bookmaking, Steinberg decided to pursue a career as an accountant and had begun a trainee program with a Belfast firm when his father died in 1954. As the oldest child in the family, he stepped in to take over his father's businesses to support his mother, two brothers, and a sister. He hired someone to operate the milk bar and attempted to keep the optical manufacturing business running as well. However, his employees absconded with £3,000, and optics proved too technical for the young man, forcing him to shut down that business. All that remained was his father's illegal betting shop. It was here that he found success. After Northern Ireland legalized betting shops in 1957, he was able to expand the business. With the ownership of two Belfast betting shops, Steinberg founded Stanley Leisure in 1958, naming the company after his late father.

Relocating to England in the 1970s

Stanley concentrated on the lower-end of the betting market and over the next decade added some ten shops across Ulster. He also began taking bets from customers in England before betting shops were legalized there. It was in England that his future lay, especially in light of the increased level of violence that afflicted Northern Ireland. "At that time," he told the press in a 1997 interview, "there was no great difference between the IRA and the extremists on the Protestant side. They were all at the protection racket. We refused to pay." Some of his shops were set ablaze and his workers threatened. By the early 1970s, Steinberg, who as an Ulster Unionist was a target of the IRA, decided to relocate his business across the Irish Sea. He started out by operating two betting shops on the Isle of Man, which were followed by four in Yorkshire. During the middle years of the decade, he acquired more than 100 betting shops spread across northwest England. They were in poor condition and hardly attractive to the big three in the industry: William Hills, Ladbrokes, and Coral. In general, Steinberg did business in the places his larger rivals disdained, and he was willing to invest the time and money needed to grow them into healthy ventures. To achieve some diversification, he bought a provincial casino in Stockport. In 1979, he established his headquarters in Liverpool to manage his slate of betting operations.

Steinberg took the betting shop division, Stanley Racing, public in June 1986. At this stage, Stanley Racing was the sixth largest betting shop chain, but Steinberg clearly had more ambitious goals in mind. Not only did he want to add to his chain of betting shops, now numbering 117, he was interested in building up his gaming business, which consisted of three casinos. For the time being, however, he elected to stay away from London, where the rewards were greater than in the provinces but so were the risks. In September 1989, Stanley became involved in the Republic of Ireland market by acquiring the 58-shop Mecca chain. Also in 1989, the company grew the gaming side of the business by acquiring five casinos in England from Brent Walker. A year later, Stanley added eight more casinos from Leading Leisure.

Stanley's growth was held back in the early years of the 1990s due to a recession, but by mid-1993 profits began to show improvement, especially in the casino trade. On the horizon was a national lottery, which was a cause of concern to many, but Steinberg maintained that while his betting shops, which now numbered 355, might be adversely impacted in the beginning, the lottery would in the end carve out its own clientele of bettors and simply serve to grow the gaming market. Moreover, the lottery was not expected to have any impact on Stanley's string of 18 casinos.

In 1994, Stanley raised an additional 21 million pounds in the equity market for further expansion. Over the course of the year, the company added another provincial casino and 70 more betting shops. However, in the fall of that year Steinberg also underwent heart by-pass surgery and had to take about three months to convalesce. He used this time to plan a strategy for Stanley's ongoing growth, looking to move into southern England and ultimately London. Steinberg also remained committed to serving the middle market and was loath to overpay on acquisitions. A major factor in the expansion of the company, as well as the growth of British gaming in general, was the move towards deregulation, an issue on which Steinberg had emerged as one of the industry's chief champions. An area of particular contention was the addition of slot machines, so-called fruit machines, to casino operations. The new regulations permitted three machines per gaming table, a change that Steinberg expected to significantly alter the casino business and lead to greater profitability. Betting shops would also be allowed to install two slot machines. In addition, at the end of the 1990s the government opened up 20 new markets to casinos in England, but several of the proposed sites--such as the seaside towns of Morecambe, Weymouth, and Hastings--were not considered large enough to support a casino. Steinberg was also eager to offer gaming machines with payoffs in the £100,000 range, but the government was reluctant to move too quickly on that front. As part of his effort to improve gambling's image and influence the government, Steinberg established in 1997 a Centre for Gambling and Commercial Gaming at the University of Salford.

The next major event in Stanley's history came in 1999. After failing to buy the Coral betting shop chain, Steinberg was successful in acquiring troubled Capital Corporation plc for £86 million, a deal that brought Stanley into the London market with the addition of three city casinos: the Colony Club, Cromwell Mint, and Crockfords, Britain's top venue and London's oldest private gaming club. While Crockfords added luster to Stanley's portfolio, and fulfilled a goal of becoming a major presence in London, Steinberg was not interested in relocating his headquarters to the city. Rather, he preferred to stay in Liverpool, in keeping with his belief that the provincial casinos, although far less glamorous than the London clubs, remained the backbone of his gaming division's success. Even as he was staking out the London market, Steinberg had to contend with competition on another front--the Internet, which threatened to revolutionize the gaming industry.

Internet Gambling Sites Acquired in 2000

Internet gaming was illegal in the United Kingdom in 1999, but the lure was so great that U.K.-based companies began looking for a way to become involved in the business by going offshore. Ladbrokes, the country's largest chain of betting shops, was already gearing up to offer Internet bookmaking and casino games, and Coral, the third-largest bookmaker, bought a Gibraltar-based Internet betting service called Eurobet. Steinberg expressed his displeasure with these moves by U.K. bookmakers, but because he risked being left behind he began shopping for an Internet gaming company to acquire for Stanley. Finding the right candidate, however, proved difficult, as so few of the Internet gambling sites were profitable. In March 2000, Stanley acquired two offshore gaming sites, Acropoliscasinos.com and Avaloncasinos.com, then announced he was taking the associated infrastructure and wedding it to the Crockfords name, one of the most prestigious in the gaming world. As a result of taking Crockfords online, which debuted in 2002, Stanley would become the first company to combine a virtual casino with a real one. Players with an interest in archi- tecture would also be able to take a virtual tour of Crockfords' 18th century premises. In addition to virtual casinos, Stanley launched a sports betting site, Stanleybet.com, in 2000.

The advent of online gaming also provided Steinberg and U.K. gambling interests with leverage in their lobbying efforts with the government. Steinberg maintained that the gambling industry was taxed far more than any other leisure industry and that it actually paid more in betting and gaming taxation and duty than it made in profits. He also claimed that if taxes on betting shops and casinos were reduced, the treasury would not lose money because gaming revenues would increase and generate the same amount in taxes. In February 2001, the country's five largest bookmakers, all with offshore gaming operations offering tax-free bets, gave the government an ultimatum: Either eliminate the 9 percent tax on bettors in exchange for a 15 percent tax on the gross profits of the bookmaker or risk the destruction of the domestic gambling industry. The government gave in to the demand and most of the British bookmakers closed down their tax-free offshore operations.

In the early years of the 21st century, Stanley increased its holdings in land casinos. In 2001, it added casinos in Plymouth and Torquay. A year later, it bought casinos in Brighton and Luton and picked up another five from Tower Casino Group, adding two locations in Birmingham and ones in Reading, Blackpool, and Derby. In May 2002, Stanley opened a new casino in Manchester called The Circus that featured four of the new games the government now permitted as part of its deregulation effort. These games were Sic Bo, a dice game popular in the Pacific Rim; the Wheel of Fortune, a vertical spinning wheel game; three card poker; and progressive casino study poker, which featured a linked jackpot.

Stanley continued to expand in 2003. Although it failed in its bid to acquire London Clubs International, it was able to buy one of the London Clubs' casinos it coveted, the Palm Beach Club in Mayfair. This addition further solidified Stanley's presence in the London market. In November 2003, Stanley opened Star City Casino, the largest to date in the United Kingdom at 70,000 square feet. The facility featured 40 gaming tables, 200 slot machines, and 80 automated games. Star City also offered entertainment, restaurants, and bars--more in keeping with Las Vegas-style casinos than the staid English gaming clubs in the mold of Crockfords. Other changes were also underway in 2003. The company took steps to refine its branding and elected to rename Stanley Racing as Stanleybet, a name which was also applied to the company's telebetting operation, now known as Freephone Stanleybet, while online gambling operations became Stanleybet.com.

However, Stanley also faced uncertainties, as the 66-year-old Steinberg, who held 20 percent in the company he founded, announced his intention to relinquish his executive post. Speculation arose that Stanley's chief executive, Bob Wiper, was about to lead a management buyout effort to take the company private, or that possibly a U.S. casino operator, keen on entering the U.K. market before even more deregulation took place, might make a bid. Such talk continued in 2004, leading to volatility in the price of the company's stock. Stanley's stock would tumble in 2004 when the government announced stricter controls, adversely impacting the smaller casinos, which would now be blocked from offering Las Vegas-style slot machines offering unlimited prize money. These slots would be available only in the largest casinos, and the provincial casinos would continue to be limited in the number of slot machines they could offer per table. Although Stanley operated several large casinos, its portfolio included many of the smaller casinos facing a limited future. Moreover, U.S. interests were clearly poised to enter the U.K. market, making Stanley's prospects very much uncertain.

Principal Competitors: Camelot Group plc; Coral Eurobet plc; Ladbrokes.

Further Reading:

• Bowers, Simon, "Interview: Leonard Steinberg, Chairman, Stanley Leisure," Guardian, February 17, 2001, p. 30.
• Terry, Fiona, "Teenage Bookie Beats the Odds," Sunday Times, October 7, 2001.
• Walsh, Dominic, "Stanley Can't Rest on Its Laurels," Leisure Report, February 2004, p. 18.
• "Winner: As Leonard Steinberg Ponders His Next Move in Stanley Leisure's Bid to Gain Control of Casinos ...," Manchester Evening News, December 11, 2002.
• Woolf, Marie, "Mammon--One Man Who Knows How to Call the Odds," Observer, January 19, 1997, p. 9.

Source: International Directory of Company Histories, Vol. 66. St. James Press, 2004.

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