By Thom McLachlan

Allegations of skulduggery and the withholding of crucial information by Gold Reef Resorts chairman Maxim Krok have collapsed a R9,83bn private equity buyout of the company.

It is understood that the private equity consortium — made up of Gold Reef management, Ethos Private Equity and US bank Goldman Sachs — has allowed the deal’s final deadline to lapse after certain terms were not met on Friday afternoon, including licence approval by SA’s regional gambling boards.

The Securities Regulation Panel (SRP) said in a ruling on Friday: “Having heard the oral submissions and considered the documentation presented to the SRP, it is held that Gold Reef is in breach of rules 13, 16, 19 and 20.”

The panel said that had it known of the breach it would not have approved the transaction as presented to it last year. High court approval for the transaction followed the SRP’s approval.

The rules breached relate to “special deals with favourable conditions”, the supply of information to shareholders and “frustrating activity” of a deal, thought to have been that offered by Tsogo Sun.

Under the SRP code, a withdrawal of the offer would mean the consortium would not be permitted to make another offer for 12 months.

At an SRP hearing last week, rival casino group Tsogo Sun claimed that Krok had accepted a R12m payment to support the consortium’s R34-a-share offer for the company instead of Tsogo’s higher offer of R34,50.

Krok controls 25,9% of the shares in Gold Reef. Shareholders were told the R12m payment was for his service to the company. They were not told that it was also for the role he played in negotiating a buyout price.

It is likely that the SRP would have taken issue with Gold Reef’s withholding from shareholders the full reason for the payment to Krok, and not telling them of the R34,50 offer.

Minutes of a board meeting of August 10 show Krok did not tell the board that Tsogo Sun’s offer was bank-guaranteed, despite his knowing that it was. As a result, advisers Merrill Lynch recommended at the same meeting that the board reject the offer.

According to industry commentators, the SRP’s ruling leaves the high court’s sanctioning of the deal open for review. It has also put the brakes on the gambling boards allowing the transfer of licences for Gold Reef’s casinos to the consortium.

The deadline for the transaction was originally last Thursday, but it was extended until 5pm on Friday last week. It is understood that no further extensions have been set.

A point raised by the SRP during the hearings was that if minorities were prejudiced by the deal being delayed or cancelled, shareholders could take legal action to reclaim damages from Gold Reef and the consortium itself. The SRP is yet to give the reasoning for its ruling.

Source: Business Day