When the Ethos consortium withdrew its offer for Gold Reef Resorts following a Tsogo Sun initiated reconsideration by the South African Securities Regulation Panel (SRP), the share price of the Gold Reef group fell. Yesterday shares were higher on news that Tsogo Sun had once again approached the Gold Reef board about a possible offer. Tsogo Sun had previously made a higher bid for Gold Reef than that offered by the agreed deal with Ethos – the cause of the SRP re-examining the takeover.

Tsogo Sun has already expressed surprise that Gold Reef had issued an announcement to shareholders about the preliminary meeting as there was no certainty of a deal or any indication of what price could be offered. However, having been accused of not telling its shareholders about the original Tsogo Sun offer, Gold Reef must realise that any future deal must remain transparent at all stages.

A merger of the two groups will certainly raise competition issues. Tsogo Sun claims that the casinos operated by Gold Reef attract a different market from those operated by it, and therefore do not compete. The province of Gauteng, with Tsogo Sun’s Montecasino and Gold Reef’s Gold Reef City and Silver Star casinos, is likely to be concerned about competition. If the two companies did merge they would control over half the casino market. (E-02.22.08)

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