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TSOGO SUN PLACES BIG BET ON GROWTH

TSOGO Sun looks set to become the world’s seventh- largest listed hotel and casino group once the merger with Gold Reef Resorts takes place.
Global growth has been the privately held group’s long- term strategy but it had lacked the financial muscle.

However, gaming companies around the world have largely been decimated by ballooning debt triggered by the recession, and this has yielding buying opportunities for those with the means to purchase.

With R5.5-billion in debt, compared to a market capitalisation of R21-billion, the enlarged Tsogo group will have one of the stronger balance sheets in the Industry.

Local growth opportunities are limited no new casino licences are being awarded and organic growth has been stifled due to the recession.

An opportunity might arise In the Western Cape when Sun International’s exclusivity expires at the end of this year at Grand West. While Gold Reefs current management has Indicated that they want to move into the Western Cape, Tsogo management declined to comment.

Marcel von Aulock, Tsogo Sun’s chief financial officer, said the industry was fragmented internationally with many regional operators, much like the beer industry a decade ago.

Shareholder approval for the deal is expected to go through without a hitch, but some analysts caution that competition authorities might not hold a similar view.

Von Aulock said: “We would not be pursuing this deal If we did not feel they could satisfy the competition authorities.”

Source: Sunday Times – Business Times – Adelle Shevel