Conditional approval for casinos� merger
Isaac Pinielo | Tuesday August 4, 2015 18:00
In a merger decision notice released on Friday, the CA said they decided to authorise the proposed acquisition transaction on condition that the global and gaming giants will not be involved in mapping business strategy for the local casino operations.
The CEO of CA, Thula Kaira explained that the Authority had made conclusive analysis.
“Although there are competition concerns that will arise with respect to the 3-4 star grading short-term accommodation and hotel facilities market, they are less likely to result in substantial lessening of competition, as the market under consideration is highly contested.
“However, the Authority’s analysis highlights the potential competition concerns which could arise in the casino and gaming market, due to the proposed transaction, given that it results in a reduction in the number of players in Gaborone and Francistown,” he said.
The approval of the acquisition of Peermont’s assets in Botswana results in Sun International, which divested out of Gaborone Sun last year, but retained the Casino business there, owning all casinos in Francistown and two of the three in Gaborone.
The transaction also results in Sun becoming the new owners of Peermont’s Grand Palm hotel, Mondior and Metcourt Inn.
As part of the conditions meant to lessen dominance by a single operator in the casino industry, CA decided that Sun International will with immediate effect, remove its appointed director from the board of directors of Sun International Botswana (SIB) and will undertake all such steps as are necessary to remove any contractual right that it has to appoint such a director.
CA also ruled that the hotel chain would within six months of the date of implementation of the transaction ensure that they are only involved in the day to day running of the casinos and not in any matter of strategies relevance.
“The agreement should reflect that Minor Hotel Group, or any of its affiliates shall be solely responsible for determining all matters of any strategic importance in relation to the function, operation and marketing of the SIB casinos including in relation to price setting, promotions, giveaways and service standards,” said Kiara.
Minor Hotel Group is Sun International’s strategic partner in Africa operating the newly rebranded Avani Gaborone and Casino Hotel and seven other assets across the continent.
In addition, CA said Sun International shall not be called upon to provide any input into any strategic matter and that it shall at all times refrain from providing any such input.
The conditions also state that Sun International will ensure that with immediate effect, none of its employees providing services within the operations of the SIB casinos will in any manner or capacity simultaneously be employed within the operations of any Peermont casino within Botswana and vice versa.
“All employees within the SIB and Peermont casinos in Botswana are subject to appropriate non-disclosure undertakings,” it said.
Given the conditions, Sun International is expected to provide CA with an annual and detailed report on execution of these undertakings, until such a time to be determined by the Authority. The report is to be compiled by an independent consultant approved by the authority, and Sun International South Africa will bear the costs of engaging such consultant.
Appearing before the CA earlier on, Sun International defended its intended acquisition, arguing that the proposed transaction is unlikely to raise any significant competition concerns in Gaborone or Francistown as Peermont and Sun International have spatial and otherwise differentiated casino offerings focusing on different customers and catchment areas.
Sun also indicated the two companies’ casinos in Gaborone and Francistown are differentiated in terms of location, look, ambiance and offering, which meant that they attract different types of customers. To further cement their argument, Sun stated that in Gaborone, Peermont’s Grand Palm is situated on the outskirts of the city to cater for high-end customers, while Sun International’s Gaborone Sun is more centrally located for general customer traffic.
In South Africa, Peermont owns eight resort and gaming operations including Emperors Palace in Gauteng and Graceland in Mpumalanga.