By Michael Bleby

If the authorities rule that Tsogo has to sell Silverstar it’s unlikely to be a deal breaker

Tsogo Sun Holdings’ bid for Gold Reef Resorts moved closer to an outcome, as counsel for the two casinos and the Competition Commission wrapped up their arguments before the Competition Tribunal.

Thomas Bokaba, SC, for the commission said Gold Reef’s Silverstar casino in Krugersdorp competed closely with Tsogo’s Montecasino in Fourways, and a merger of the two groups would lessen competition.

"Silverstar is Montecasino’s most effective competitor," Mr Bokaba said. "Silverstar derives 47% of its revenue from suburbs where Montecasino operates. The Tribunal should approve this merger subject to the divestiture of Silverstar."

The tribunal’s ruling is the last effective step preventing Tsogo from fulfilling its tortured five-year ambition to buy Gold Reef. After a series of twists and turns that at one time included a hostile bid by Tsogo to take over its smaller rival, the groups last year agreed on a R21bn merger that would see Tsogo take control of Gold Reef’s properties.

Counsel for the two companies yesterday disputed that the casinos were rivals, arguing that casinos competed against other entertainment and leisure outlets such as restaurants and cinemas for disposable income, rather than against other casinos.

"That body of aggregated dispersed entertainment options is one that constrains behaviour and that is what you need to be concerned with," responded Jerome Wilson.

Arguments about the merger revolve around the definition of markets and how competition within the industry should be construed. Gauteng’s seven casino licences are allocated by geography and are operated variously by Tsogo, Gold Reef, London Clubs International, Peermont Global and Sun International .

That geographical dispersal makes assessing whether different casinos compete against each other a futile task, said De Wet Schutte, an analyst with Avior Research in Cape Town.

"There’s a certain kind of irrational logic to the Competition Commission’s recommendation," Mr Schutte said. "You are already regulated by the fact that the government gave a (casino) licence for a specific geographical region. … You already have monopoly for that region. It’s always about competing for the market versus competing in the market."

He said, however, that if the antitrust process ruled that Tsogo did have to sell Silverstar, it was unlikely to be a deal breaker.

The hearing adjourned, and the tribunal will rule at a later stage.

Source: Business Day