Interests in the Western Cape gaming market have been re-shuffled with casino and hotel giant Tsogo Sun significantly strengthening its hand.
At the end of 2017 investment company, Trematon proposed selling its 29.64% shareholding in West Coast Leisure to Tsogo Sun – controlled by Cape Town-based empowerment company Hosken Consolidated Investments (HCI) – for R190m.
West Coast Leisure effectively holds a 29.64% stake in the Mykonos Casino with the balance of the shares already owned by Tsogo. The deal values the Mykonos casino at over R600m.
What the deal means is that Tsogo now effectively has outright control of three of the five casinos in the Western Cape – Mykonos, Caledon and the Garden Route casino. Tsogo – as reported in Cape Business News last year – also has influence at the GrandWest and Worcester casinos, courtesy a deal that saw Sun International and Grand Parade Investments (GPI) reduce their respective shareholdings.
In other words, Tsogo holds all the aces should the Western Cape Government allow one of the existing provincial casino licences to be transferred to the Cape Town metropole.
Tsogo has also made a surprise bid for the gaming assets owned by Cape Town-based investment company, Niveus – also controlled by HCI. This deal will give Tsogo access to Niveus’ limited payout machine (LPM) operations and electronic bingo terminals (EBT), as well as a strategic shareholding in the newly-developed Kuruman casino.
This deal mimics a similar deal undertaken by Sun International when it bought control of the LPM operations held by GPI. Sun International now owns 75% of GrandSlots and GPI’s stake has been reduced to 25%.
LPMs and EBTs are often regarded as mini casinos. Revenues are obviously considerably lower than a fully-fledged casino operation, but the cost of development, operation expenditure and the maintenance bill is far lower.
Both Niveus' Vukani and GPI's GrandSlots, which has a sprawling Western Cape presence, have generated promising profits in the last few years.
Some observers were surprised that Trematon sold its interest in the Mykonos casino as the property had produced a reliable profit stream over the years.
Arnie Shapiro, Chief Executive Officer, Trematon conceded the Mykonos Casino had proven to be an excellent investment for the group.
“We have, however, been working for some time on diversifying the concentration risk in our portfolio”.
He said the Mykonos casino was a very good and stable business.
“But we felt that it would be best to sell the asset and redirect the cash into investments, which would generate better internal rates of returns.”
The fate of Niveus sans its core gaming assets remains a mystery – although it is receiving Tsogo shares as settlement. The company also recently sold its operational assets in KWV.
Niveus will now comprise a significant minority shareholding in Tsogo Sun, a sizeable cash holding and the old KWV property assets (mainly Laborie and La Concorde,) as well as valuable South African art works.
Whether the cash pile held by Niveus is mobilised for new investments remains to be seen. In the meantime rumours are swirling that HCI might buy out the company – a deal that would consolidate its control of Tsogo's valuable gaming and hotel assets.