Competition Commission counsels against Peermont takeover

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Sun International spokesman Michael Farr said the company had not yet received a detailed report on the recommendation made by the Competition Commission to the tribunal. "We don't know the detailed issues, so it's virtually impossible to say what we can or can't do in pursuing an appeal," he said. There will be a sense of urgency at Sun International to tackle the competition issues, as approval by the tribunal is a condition precedent to the buyout deal that needs to be fulfilled by the end of March.

Gaming industry sources said it would be interesting to gauge whether the commission's reluctance to give the deal the green light was premised on concerns around national or provincial casino concentration. Sun International - which holds the GrandWest casino in Cape Town, Carnival City in Gauteng and Sibaya in Durban as its flagship properties - has already indicated a willingness to restructure its portfolio by selling smaller casino interests.

Takeover incentives

The takeover would have bolstered Sun International's presence in Gauteng markedly, as Peermont owns the Emperors Palace casino (along with a slew of smaller casino properties). Sun International owns Carnival City in Brakpan, as well as the Morula Sun, which will soon be relocated to Menlyn Maine in Pretoria. But Tsogo Sun - which owns the Montecasino, Gold Reef City and Silverstar casinos - would remain the dominant player in Gauteng.

Jan van Niekerk, CEO of Regarding Capital Management, said there was a considerable incentive for Sun International to clinch the deal to preclude paying a "break fee" to Peermont if the deal did not go ahead. Peermont initially objected to the Morula relocation - a matter compensated for in the deal terms. These stated that if the acquisition of Peermont was not implemented and the new casino at Menlyn Maine opened, Sun International would issue Peermont with a financial instrument to settle a capital amount of between R700m and R900m.

Sun International's proposed Peermont takeover was largely seen as the last big number card in the consolidation of the local casino sector, which has battled for growth in recent years.

Source: Business Day