Casino group has given us a good ride, but we may flog it — MIC
SUN International has kept shtum since launching its R9.4-billion tilt at gaming group Peermont, the owner of Gauteng’s lucrative Emperors Palace casino. Business Times tracked down Mary Bomela, the CEO of the Mineworkers Investment Company (MIC), which owns 25% of Peermont, and put her on the spot.
You’re one of Peermont’s biggest shareholders at 25%, but you used to own 33%. Why has that holding fallen?
We did a debt restructuring last year where some debt instruments were converted into equity and we were then diluted. Sun International has put a price of R9.4-billion on Peermont, taking into account its senior debt of R3.85 billion. Is that a fair price?
Definitely.
So you are supportive of the Sun International offer?
We are. The gaming industry in South Africa is quite competitive and it’s getting to a point where it’s mature . . . so where does the new growth come from? Already you have only three real big groups in the country. One has already consolidated and I suppose it only makes sense for a SunPeermont consolidation after the Tsogo-Gold Reef [deal].
You say “it only makes sense”, but it raised our eyebrows: how is it going to fly with the competition authorities?
Well, I hope you raised those same eyebrows when Tsogo did their deal [with Gold Reef]. Genuinely, it’s not different to the Tsogo deal. They also have concentrations in certain areas and so on, so we don’t see this as a deal that’s very different to that previous transaction.
Sure, but the Competition Commission has recommended that Tsogo’s bid for a stake in GrandWest Casino be blocked . . .
We’ll have to see what their views will be. But we believe there is a strong case, and there is possibly a way of tackling it as well. I think we’ll have to cross that bridge when we get there.
Has Peermont been a good cash-generative investment in the past couple of years, given the debt that was taken on to buy out and delist the company in 2007? How much cash did you actually get out of this investment?
It’s been a good investment overall, no complaints, especially if you consider when we did the [leveraged buyout]. We were able to extract quite a lot of value at the time. The amount of debt that was put in post the [buyout] was a bit much for the organisation. The growth then slowed down, but we don’t regard this as a bad investment — it’s done very well for us.
How much did the MIC make in profit at the delisting?
No, you’re not expecting me to give you a number on that, are you? It’s better left as a “good return on our investment” . . .
Was the private-equity deal in 2007 a mistake, especially if you consider the environment after that? With hindsight, would you have kept Peermont listed?
No. You make a decision at a point in time based on information at hand. With the information that people had at that time, it wasn’t a bad decision.
Is the MIC going to sell its stake in Peermont now?
That’s still under consideration — it’s not a [clear-cut] yes or no. We’ve been given options and we are working through that and obviously it needs board approval. The MIC is an investor like any other, and you have to turn over some of your investments . . . so when there is an opportunity and there’s a good offer on the table, you need to consider it. We’ve been with Peermont for a long time, since the late 1990s.
So what would make you consider selling?
Well, it would have to be in line with our investment philosophy so I suppose the issue is: does staying in still meet our investment criteria?
What are your investment criteria?
We look at cash-generative investments, being a shareholder of reference . . . the nature of the MIC is to be able to repatriate dividends to our trust [the Mineworkers Investment Trust].
Are you proud of how the MIC has done? You started with seed capital of R3million in 1995 and your net asset value last year was R4.1-billion.
It’s over R5-billion now . . . It’s been a remarkable ride. The business has done very well, and as with any investment house you will face challenges. You can’t always expect everything to go smoothly. However, on the balance of things, the MIC has done incredibly well.
Will you continue to invest in established companies, or is there a more developmental mandate that you would take on – investing more in black industrialists and blackowned companies?
We look at investments across the board so we will do investments that are a bit mature and we will back black industrial businesses but . . . they need to show growth potential.
Does the government’s rhetoric against white established businesses put you in an awkward spot as an investor?
I don’t think so. Our mandate is not confined to just investing in white businesses. It’s not about whether you are just a BEE partner, it’s also about businesses that you can help grow and create value out of.