GPI in play as Sun ups the stakes
• Gaming giant snatches more than 10% days after GMB bumps up its stake
A takeover battle is on the cards at Grand Parade Investments (GPI), which holds stakes in two of the most profitable gaming assets in SA. A surprise disclosure on Friday saw gaming and leisure giant Sun International snatching a 10.56% stake in GPI only days after GMB Liquidity Corporation bumped its stake in GPI to above 35%.
A takeover battle is on the cards at Grand Parade Investments (GPI), which holds stakes in two of the most profitable gaming assets in SA.
A surprise disclosure on Friday saw gaming and leisure giant Sun International snatching a 10.56% stake in GPI. This came only days after GMB Liquidity Corporation bumped its stake in GPI to over 35.14%, triggering a mandatory buyout offer to GPI’s shareholders.
The developments have been good for GPI shareholders with a 25% gain in the share price since mid-October.
Sun has not yet articulated its intentions at GPI. But GPI and Sun have endured a long and sometimes tempestuous relationship.
GPI has been Sun’s 15% empowerment partner at its cash-spinning GrandWest casino in Cape Town since the late ’90s, and also holds a 15% stake in Sun’s Golden Valley casino in Worcester and 30% of Sun’s highly profitable SunSlots, limited payout machine and sports betting business.
Gaming experts regard these assets highly. GrandWest has been a consistent profit spinner at high margins and SunSlots holds a viable niche that has shown a faster-than-expected recovery after Covid-19 restrictions were eased and then lifted.
While the Golden Valley casino is small in terms of revenue and profit, the property holds strategic value if plans for a second casino in the Cape Town metropole materialise. This would involve one of the existing Western Cape licences being transferred to Cape Town — and ending the exclusivity that the GrandWest casino has enjoyed for more than two decades.
Before the Covid-19 outbreak, Sun was at an advanced stage in negotiating to buy GPI’s remaining stake in SunSlots. But negotiations were called off as Sun’s debt worries increased during the long shutdown periods for casinos during the early stages of the pandemic.
Initially Sun — which is still in the throes of curtailing its debt burden of R5.9bn — seemed in no rush to revisit negotiations with GPI to acquire the remaining 30% in SunSlots. GPI, on the other hand, had bigger fish to fry over the Covid period in finalising the sale of its stake in fastfood chain Burger King.
SLENDER PREMIUM
The emergence last month of GMB — which has merchant banker and horse racing enthusiast Gregory Bortz as its prime mover — as the largest shareholder in GPI might well have spurred Sun into action.
Indications are that GMB would reconfigure GPI as a pure gaming play, with speculation that other gaming assets could be ushered into the company in the longer term. GMB was earlier this year involved in taking over the struggling Kenilworth Racing, which was undertaken in partnership with sports betting business Hollywoodbets.
As things stand, GMB is offering GPI shareholders 333c a share. GMB has indicated it does not want to delist GPI from the JSE. The slender premium offered in the mandatory offer on GPI’s average share price over the past 30 days also seems to indicate that GMB is not banking on convincing all GPI shareholders to sell their shares.
It seems Sun may have paid about 350c a share for its 10.4% stake. Market watchers are now speculating whether Sun will tilt for more GPI shares.
There are several sizeable shareholders, including activist investor Value Capital Partners, that could be approached if Sun intends building a larger holding to challenge GMB.
Market watchers, however, have questioned whether Sun would be keen at this point to stretch its balance sheet to acquire control of GPI or even make a pitch to buy out the company. Sun has made great inroads in reducing its SA debt, which only a few years ago stood at more than R9bn. The initial foray into GPI would have cost Sun over R165m.
GPI has a current market value of just more than R1.6bn.