Tomorrow the Gauteng Gambling Board is holding a hearing on the private equity buyout of South Africa’s Gold Reef Resorts by Ethos Private Equity. Last week rival gaming operator Tsogo Sun alleged that the buyout, involving Goldman Sachs and Gold Reef’s senior management, involved compensation for accepting a lower bid than one offered by Tsogo Sun, to the detriment of small shareholders.

In August Gold Reef shareholders approved the Ethos buyout but Tsogo Sun says its earlier R34.50 per share offer was not mentioned when 76.1% of Gold Reef shareholders accepted the Ethos bid of R34. Tsogo Sun has asked the Gauteng Gambling Board to investigate the non-disclosure of its offer and the payment made to Maxim Krok, Gold Reef Chairman. Gold Reef maintains that Krok was paid R12 million for services rendered.

The Securities Regulation Panel has not been asked to investigate the alleged prior bid but states it has not ruled out undertaking an investigation anyway. Gold Reef says that the Tsogo Sun submission is ‘argumentative, unsustainable and irrelevant’ and further charge that Tsogo Sun is trying to delay the Gambling Board procedure beyond 31 January, after which the R11.4 billion (US$1.6 billion) Ethos offer is withdrawn.

Tsogo Sun has said that it will consider making a complaint to the Securities Regulation Panel but will first focus on the Gambling Board hearing tomorrow. The company operates Montecasino in Johannesburg, SunCoast Casino & Entertainment World in Durban, The Ridge Casino and Entertainment Resort in Witbank, and Emnotweni Casino in Nelspruit. Gold Reef Resorts includes casinos in Gold Reef City, the north of Cape Town, Pietermaritzburg, Mossel Bay, Welcom and has an additional casino licence for Gauteng. (E-01.10.08)

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