International resort and hotel chain, Sun International has defended its intentions to acquire hotel and gaming company, Peermont Group, saying the takeover is unlikely to result in anticompetitive behaviour in the casino industry.
If granted regulatory approval, the acquisition of
Peermont’s assets in Botswana will 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.
At a public hearing on Tuesday, Sun International, represented by James Horge, told the Mergers Review Committee of the Competition Authority (CA) that the proposed transaction is unlikely to raise any significant competition concerns in Gaborone or Francistown. Horge’s argument was that Peermont and Sun International have spatial and otherwise differentiated casino offerings focusing on different customers and catchment areas.
“The proposed merger is unlikely to result in any upward pressure on the pricing of hold ratios, or a diminished offering in terms of other non-price factors,” he submitted.
Horge also indicated that these findings are supported by evidence from Selibe-Phikwe natural experiment, where spending at the Menateng Casino did not change following the closure of Syringa Casino. “Evidence provided in the Genesis report from the Menateng Casino shows that hold ratios did not increase after the closure of the casino. Neither complimentary nor promotional spend changed after the closure. There was no discernible effect on the behaviour of Menateng Casino,” he stated.
The percentage of money the bookmaker or house holds onto after all bets have been settled is referred to as a ‘hold.’
Horge also indicated that it is unlikely the proposed merger will lead to changes in hold ratios and other non-price factors. He also stated that the Sun International and Peermont casinos in Gaborone and Francistown are differentiated in terms of location, look, feel and offering and as a result, to a large extent attract different types of customers. To further cement his argument, Horge 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 Francistown, Sun International’s Marang Casino has more exclusive offering with restricted access. Peermont’s Sedibeng Casino is located on the major artery in Francistown and open to off-the-street customers,” he said.
After listening to the submissions, the Mergers Review Committee, led by CA’s chief executive officer, Thula Kaira said that they would make a decision in the next 30 days.
“We will continue receiving submissions from stakeholders before making a final determination on this proposed merger over the next 30 days,” he said. It is understood that the committee will make one of the three decisions, thus, to approve the merger with condition, or approve it without condition, or to reject it.”
If granted approval, the move will see Sun International, which divested from Gaborone Sun Hotel last year, bouncing back into Botswana and taking over Peermont’s Grand Palm hotel, Mondior, Metcourt Inn and the casino at Sedibeng hotel in Francistown.
In South Africa, Peermont owns eight resort and gaming operations including Emperors Palace in Gauteng and Graceland in Mpumalanga. Peermont will however takeover the majority stake of 60 percent in the Botswana assets, as the 40 percent remainder in Grand Palm, Mondior and Metcourt hotels is held by the Botswana Development Corporation.