The proposed P9 billion takeover of gaming and hotel company, Peermont Group by JSE-listed resort hotel group Sun International has been blocked by the competition watchdog of South Africa.
The deal, which would have resulted in Sun taking over Peermont’s Grand Palm hotel, Mondior, Metcourt Inn and the casinos including the one at Sedibeng hotel in Botswana, had already been given a conditional greenlight in Botswana.
In a recommendation to its tribunal, the Competition Commission of South Africa yesterday blocked the deal saying it will prevent decreasing competition in an already concentrated market.
In South Africa, Sun International had planned to acquire 100 percent of Peermont’s controlling shareholder, investment company Maxshell Group, which owns Emperors Palace, in Gauteng, and Graceland, in Mpumalanga, to unlock new growth opportunities.
However, the commission recommended to the Competition Tribunal that the proposed deal be prohibited on concerns that, if allowed, the merger could give rise to significant competition concerns in the central Gauteng gambling market.
“The gambling industry is significant in the South African economy, with high barriers to entry as it is regulated by the various gambling boards. This merger would have created a highly concentrated market structure in Gauteng, thereby, substantially lessening competition,” acting deputy commissioner, Hardin Ratshisusu said in a statement released yesterday.
Director of communication and advocacy at the local Competition Authority (CA), Gideon Nkala said the prohibition of the deal in South Africa, where the two companies originate from, means the transaction will also not go ahead in Botswana.
“We had conditionally approved the deal based on local market conditions, which are obviously different from those in South Africa. Since this is a spillover transaction from that country, it means it will also not be effected in Botswana,” Nkala said.
In an update to the market, Sun International said it would assess its options upon receipt of the detailed report on the recommendation made by the commission to the tribunal.
The merger was to result 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. As part of the conditions meant to lessen dominance by a single operator in the casino industry, the CA had put conditions that Sun International was to, 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 conditions also stated that Sun International was to 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.