Tsogo plays losing hand in Western Cape

THE Competition Commission has thwarted a deal that would have given Tsogo Sun, SA’s largest gaming company, a hand in all five Western Cape casino licences.

The commission yesterday confirmed that it had recommended that Tsogo’s bid for a 40% stake in rival Sun International’s cashspinning GrandWest casino in Cape Town and smaller Worcester casino made in May last year be prohibited.

Tsogo and Sun International do not agree with the commission and will oppose the recommendation before an upcoming sitting of the Competition Tribunal.

Tsogo already holds controlling stakes in the Mykonos, Garden Route and Caledon casinos.

Initial speculation was that the proposed deal helped circumvent potential tensions that could arise between Tsogo and Sun International if the Western Cape government allowed a second casino licence in Cape Town.

The period of exclusivity for GrandWest ended years ago, and there has been persistent talk the provincial government would allow one of the smaller four casino owners to transfer the licence to Cape Town.

Gaming industry expert Uys Meyer, the CEO of Blue Alpha Asset Management, said the proposed transaction was good for both companies. By sharing the spoils at GrandWest there would be little motivation for either party to pump huge capital into a new casino development at a time when this segment of the gaming industry looked to be ex-growth.

The share prices of Sun International and Tsogo as well as that of empowerment group Grand Parade Investments (GPI), which is involved in the proposed deal, weakened on the news yesterday.

But executives from both Sun International and Tsogo were confident the proposed deal would still go ahead.

Sun International CE Graeme Stephens said they had not expected an unconditional approval of the proposed merger. His counterpart at Tsogo, Marcel van Aulock, said the commission’s ruling had been expected. Tsogo had undergone a similar process during its merger with Gold Reef casinos, he said.

The Competition Commission’s ruling might also concern GPI shareholders.

The empowerment company was set to bag R1.55bn from selling its significant minority stakes in the GrandWest and Worcester casinos.

hasenfussm@bdfm.co.za

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