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TRIBUNAL APPROVES GAMING MERGER

The Competition Tribunal’s decision to unconditionally approve the merger between Tsogo Sun and Gold Reef Resorts will see Hosken Consolidated Investments (HCI) move a step closer to realising its long-term ambition of playing a dominant role in South Africa’s gaming industry.

The Competition Commission had recommended that the tribunal approve the merger on condition that the merged entity sell off Silverstar Casino to maintain competition in the Gauteng market.

Friday’s decision by the tribunal is the latest development in HCI’s long-term strategy that has seen it in a drawn out battle with Johnnic and Nafcoc Investments for control of the 51 percent stake in Tsogo Sun that is not held by SABMiller. HCI’s strategy also resulted in an outbreak of hostilities between Tsogo Sun and Gold Reef as Tsogo Sun attempted to take control of Gold Reef.

After three years of hostilities, during which Tsogo Sun accumulated 24.99 percent of Gold Reef’s shares and 34.9 percent of its voting rights, last year the two companies unexpectedly announced that they had agreed to merge.

The merger deal valued Tsogo Sun, which has seven casinos and more than 90 hotels, at about R17 billion and Gold Reef, also with seven casinos, at about R5bn. The merger will entail a takeover of Tsogo Sun by Gold Reef and will be based on a shares exchange.

Tsogo Investment Holdings, which is unlisted and controlled by HCI, will be the largest single shareholder in the enlarged Gold Reef, with a stake of 41.3 percent.

SABMiller will have 39.7 percent, the Krok family will hold 6.6 percent and Allan Gray 5.9 percent.

The merged entity will control 50 percent of the Gauteng gambling market with three casinos – Gold Reef City, Silverstar and Montecasino. The commission said the merger presented no significant concerns in the other provinces.

However, it argued that it would reduce competition in Gauteng. The commission argued that Gold Reef’s Silverstar, located in Krugersdorp, was a competitive alternative to Tsogo Sun’s Montecasino, in north Johannesburg.

The merging parties argued that the casinos drew customers from their own areas and therefore did not compete.

They opposed the proposed divestiture of Silverstar.

Source: Business Report – Ann Crotty