Gold Reef lifts equity stakes with R1.4bn deal
Business Report
12 March 2007

By Audrey D'Angelo

Cape Town - Black shareholders in the eight casinos belonging to Gold Reef Resorts have agreed to exchange their holdings in these different operations all over the country for shares in the group, in a deal worth R1.4 billion.

In addition, some shareholders will top up their holdings in the group in a R287 million deal.

The transaction will lift the group's black economic empowerment (BEE) shareholding to more than 25.1 percent, improving its compliance with the code of good practice for the gaming industry approved by the department of trade and industry

Jarrod Friedman, Gold Reef's financial director, said the agreement would simplify the group structure and consolidate its gaming platform.

The directors said the initial effect of the deal would be to reduce earnings a share for the first year, because the Silverstar casino on the West Rand was still under construction and would open for business only next year.

But they expected earnings to increase when it starts operating.

The deal is subject to confirmation by the regulatory authorities.

To ensure that the BEE shareholding is not reduced, a voting pool agreement will be concluded, under which the BEE shareholders cannot dispose of their holdings for three years and then only to previously disadvantaged people, or with the approval of the area gaming boards.

Because the top-up investors are material shareholders in Gold Reef subsidiaries, fair and reasonable opinions in favour of the transactions must be obtained.

Grant Thornton and Merchant Sponsors are advising Gold Reef on the deal.

The leisure and entertainment company plans to strengthen empowerment by appointing three new black directors.

Bongani Biyela will be executive director of strategy and business management, while Richard Moloko and Patrick September will be non-executive directors.

Under the top-up agreement, 14 million Gold Reef shares will be sold for R20.50 each to shareholders in various empowerment firms, including the Black Management Forum Investment.

On Friday, Gold Reef shares gained 2.18 percent to R23.40.

<< Back