HCI betting on Gold Reef jackpot?

2010-01-31 10:50

Cape Town - Empowerment giant Hosken Consolidated Investments [JSE:HCI] and gaming group Gold Reef Resorts got tongues wagging at the weekend by issuing cautionary notices on Friday evening.

While the cautionaries were issued separately (two minutes apart, to be precise) the fact that HCI already holds a 23% stake in Gold Reef led to immediate speculation that the empowerment company was set to pitch for a bigger stake, or outright control of the gaming group.

HCI last year bumped up its stake in Gold Reef by buying out certain of the company's empowerment shareholders.

HCI, however, was not the only major new shareholder to emerge at Gold Reef in 2009. In May last year one of Gold Reef's main shareholders, Casinos Austria International Holding GmbH, sold its 20.6% shareholding in the gaming group to "a leading South African fund manager". The fund manager was largely believed to be Allan Gray.

In 2008 Gold Reef was also subject of an aborted private equity bid, which lapsed as the global financial crisis gripped the markets.

HCI's main gaming focus lies in Tsogo Sun, which holds the Montecasino and SunCoast casinos as its flagship properties.

Gold Reef's main casinos is at Gold Reef City, but the company owns an array of smaller venues.

HCI has not made any official statement on its intentions at Gold Reef. But market talk has suggested HCI would want to take effective control of Golf Reef, perhaps by looking to initially bump its stake up to 34.9% by buying out other smaller shareholder groupings (including other BEE players).

In October last year HCI chairperson Johnny Copelyn told shareholders at an AGM that the situation at GRR was "a space worth watching".

A gaming sector analyst said the timing of the deal - if the cautionaries pointed to a transaction - was very interesting.

"The casino market is tough and Gold Reef, we know, has been battling in smaller venues like Mykonos."

He said a deal would either mean HCI was seeing enormous value in Gold Reef at current levels or that the empowerment giant was expecting the casino segment to start turning soon.

Perhaps more intriguing is the prospect of HCI taking full control of Gold Reef.

That would give HCI arguably the broadest spread of casino interests of any company is SA. Aside from the Montecasino and SunCoast venues, Tsogo - which is half-owned by SABMiller - also owns Hemingways in East London, the Ridge in Witbank, the Caledon Casino and Century Casino in Newcastle (KZN).

Gold Reef - aside from its flagship Gold Reef City casino - owns casinos in Pietermaritzburg (the Golden Horse), Langebaan (Mykonos), the Garden Route, Welkom, Muldersdrift (the Silverstar casino) and Queenstown.