A proposed reshuffle of casino ownership in the Western Cape market taken off the table

Posted On Thursday, 03 September 2015 12:19 Published by
Rate this item
(0 votes)

A proposed reshuffle of casino ownership in the Western Cape market, which would have secured gaming and hotel giant Tsogo Sun a hand, is taken off the table.

A proposed reshuffle of casino ownership in the Western Cape market — which would have secured gaming and hotel giant Tsogo Sun a hand in all five provincial licences — was taken off the table at the weekend.

In May last year Tsogo proposed paying almost R2.2 billion to acquire a 40% stake in SunWest — the owner of the cash-spinning GrandWest casino in Cape Town and the smaller Worcester casino — from its rival Sun International and its empowerment partner Grand Parade International (GPI).

The proposals would have given Tsogo — which already controls the Mykonos‚ Garden Route and Caledon casinos — influence over all five Western Cape casino licences.

The deal was held up by regulatory issues‚ notably by the Competition Commission‚ which recommended in January this year to the Competition Tribunal that the deal be prohibited.

The companies initially aimed to clinch the transaction by May this year‚ but then extended the deadline to the end of August to take in the tribunal’s deliberations.

On Friday evening all three companies issued SENS statements terminating the proposed transaction after it had become apparent the end-August deadline would not be achieved.

The companies argued that the deal period could not be extended as the commercial metrics had changed. Sources speculated the development might suggest that the Competition Tribunal was likely to prohibit the deal.

Tsogo CEO Marcel von Aulock declined to comment further on developments‚ while Sun International also remained mum on the issue.

While the capitulation is a strategic setback‚ Tsogo and Sun International have plenty on their plates in continuing efforts to reshape their respective businesses. Tsogo recently hinted at unbundling and separately listing its sprawling property interests‚ while Sun International is in the throes of taking over smaller rival Peermont and furthering its advances in Latin America.

But casino industry insiders say the failed transaction at SunWest could have repercussions in the longer term if the Western Cape government followed through on suggestions for a second casino licence in Cape Town.

Initial speculation was that the proposed deal involving the GrandWest and Worcester casinos would help circumvent potential tensions that could arise between Tsogo and Sun International if the Western Cape government allowed an existing casino licence in the province to be transferred to the Cape Town metropole now that GrandWest’s period of exclusivity had ended.

The argument was that by sharing the spoils at GrandWest there would be little motivation for either Sun International and Tsogo to fork out the huge capital required for a new casino development in Cape Town at a time when the sector lacked growth impetus.

Arguably the most affected by the decision to call off the deal is GPI‚ which now retains its significant minority stake in the GrandWest and Worcester casinos.

GPI‚ which also sold control of its alternative gaming assets (mainly limited payout machines) to Sun International last year‚ intended using the proceeds from selling its casino interests to fund the expansion of its fast food venture‚ Burger King. GPI CEO Alan Keet said that the company had been planning for this eventuality since November last year.

“We are happy to hold the casino assets‚ which generate lots of cash for us. If another opportunity comes along to sell these assets we‚ of course‚ will look at it.”

Mr Keet stressed that the Burger King roll-out was never dependent on the proceeds from selling the casino interests.

“I think shareholders that might have expected us to pay a special dividend might be disappointed.

“But we have alternative plans for funding expansion at Burger King and we don’t expect growth to be impeded.”

Source: BD

Last modified on Thursday, 03 September 2015 12:41

Most Popular

Property sales and development in Cape Town’s East City precinct healthy despite pandemic

Sep 01, 2020
Jeff_Kleu
Just nine months after launching to market, 63% of The Harri, a new 48-unit apartment…

Realising the potential of embattled Cape York

Sep 01, 2020
Cape_York_Focus
Previously owned by the Bank of Mozambique and abandoned, Cape York had been hijacked and…

Minister de Lille applauds Women in Construction at 2020 ERWIC Awards

Aug 31, 2020
Patricia De Lille
“Women in SA need to be given the opportunity to participate meaningfully, including in…

Business parks thrive as industrial tenants seek value

Sep 10, 2020
Rael Levitt
Business parks are coming into their own as a viable asset class in commercial real…

Creativity on the march across retail landscape

Sep 14, 2020
Belinda Clur MD
Creativity is on the march across the retail landscape as sector players get to grips…

Please publish modules in offcanvas position.