The takeover battle for Tsogo Sun’s casino business, between Hosken Consolidated Investment (HCI) and Johnnic Holdings, continues whilst black economic empowerment (BEE) group Grand Parade Investments (GPI) reports a 50% revenue rise and a Sun City BEE deal comes under fire. South Africa’s gaming industry is thriving and gaming company shares are profiting from the country’s recent economic performance.

In Cape Town business is booming at Sun International’s GrandWest Casino and Entertainment World. A US$49.4 million upgrade and expansion is underway, and BEE partner GPI has reported earnings for the year to June as being up 166% from the comparable period last year. The company’s operating profits rose 106% to R33 million (US$5.19 million). GrandWest holds lead position as South Africa’s most profitable casino and GPI is now in discussions with the new Sun International Worcester Casino, with a view to acquiring a 38% stake.

Another Sun International BEE deal in Sun City is causing controversy although the company is adamant that the sale of shares worth R600 million (US$97.4 million) is to a broad-based consortium. Some members of the North West Gambling Board are apparently disputing granting the necessary regulatory approval for the deal, amidst claims that attempts had been made to push it through. The centre of the controversy is the nature of the BEE consortium, which critics say is contrary to the spirit of the sale of shares Sun International, as Kersaf Investments, originally held in the North West Development Corporation. The consortium is led by the former North West premier Popo Molefe, who is not a resident of North West Province, and the sale of the shares includes a discount of R217 million.

The ongoing skirmishes between HCI and Johnnic for control of Tsogo Sun casino business has led to HCI making an offer for all Johnnic shares it does not own, as required bt Stock Exchange regulations. At present HCI has a 39.7% interest in Johnnic but its offer has been recommended for refusal by Johnnic shareholders as being too low. The HCI offer will not yet be raised, as the company considers that its shareholders would be better served by using the money elsewhere. HCI is happy to play a waiting game, stating that sooner or later it would gain control of Johnnic. (E-12.02.05)

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