re: + acquiring darwin casino + Sky City confident of jackpot in...

re: + acquiring darwin casino + Sky City confident of jackpot in Darwin

02 February 2004
By KAREN CHAN

Sky City's previous Australian acquisition may score a mere pass mark, but the company is betting its tilt at Darwin's biggest casino will be a different story.


The casino operator revealed two weeks ago it was in talks to buy the MGM Grand Darwin casino Worth an estimated $A150 million to $A220 million ($NZ170 million to $NZ250 million), it would be Sky City's first big casino acquisition since the $NZ238.6 million Adelaide casino purchase in 2000.

Analysts say Sky City has done a "reasonable" job on Adelaide but believe there is scope for improvement.

"We were pleased with the experience in some respects," Sky City managing director Evan Davies said. "Though it is disappointing some elements are taking longer than we would like."

But he believed an MGM Grand Darwin acquisition would be very different. Given Sky City is now a much bigger organisation, he estimates the casino could take as little as a year to digest.

"Adelaide was a turnaround business. Darwin is in a more stable state – the process would certainly be quicker.

"That's not to say there aren't things we could do to add value, just that rather more care and attention has been given to Darwin."

But Darwin is not a done deal. Sky City is carrying out due diligence and estimates negotiations will take a month or two to complete.

Authorisation from Northern Territory's regulators to operate a casino could take another three to six months to acquire.

Analysts have said the deal will hinge on the price – something Mr Davies was not prepared to discuss. But if negotiations broke down Sky City would not necessarily seek to replace the deal – though it would still be interested in Australia, he said.

"We are interested in the Darwin business because we think that we're in a position of understanding that community and its aspirations, and clearly the possibility is that it is available under appropriate circumstances including price."

An appropriate price would also be crucial to any purchase of British company Aspinall's 41 per cent stake in the Christchurch Casino.

That possibility surfaced late last year with claims by Christchurch Casino chairman Barry Thomas that Sky City was trying to "muscle in" on the casino.

Mr Davies said the company was interested in the stake – but again only at the right price. He had known the Aspinall representatives for months and it was clear for some time that they were interested in exiting the business.

Mr Thomas threatened to withhold a $1.2 million cash injection from his joint venture with Sky City in Queenstown in an attempt to hinder any action by Sky City in Christchurch. He has since paid.

Despite that, Mr Davies said Sky City had no problems working with him in Queenstown – or in Christchurch.

"Given the relationship we have had I can't see why there would be any difficulties."

Even with Sky City's involvement in two potential deals, Mr Davies does not think it is in a particularly acquisitive mood.

"We've consistently said we have fundamental capacity for growth in the business through acquisition. . . but the focus is certainly still on growing and improving the businesses already in the group."

But he also said the company would not necessarily be any less acquisitive even if it bought MGM Grand Darwin, as it has "substantial financial capacity" for the right opportunities.