Ethos-led R11bn offer for Gold Reef Resorts
Business Day
5 September 2007

Nicola Mawson

A CONSORTIUM led by Ethos Private Equity made a firm bid for Gold Reef Resorts yesterday in a deal worth R11,4bn, which would increase the company’s black economic empowerment stake from 25,1% to 30%.

Ethos said it had expressed its “firm intention” to buy out all Gold Reef Resorts shares for R34 each , implying an enterprise value of R11,4bn and making the deal one of the largest in SA.

The bid was a 48,5% premium to Gold Reef’s pre-cautionary price of R22,90 on March 8. The share traded at R32,21 late yesterday afternoon, and closed at R31,75 on Monday.

SA’s gambling industry was worth R11bn in 2006, according to Gold Reef’s annual report.

Absa Asset Management Private Clients analyst Chris Gilmour said Gold Reef’s likely delisting would leave only Sun International in the JSE’s gaming sector . It was unlikely Sun International would be bought out, as it had embarked on a capital intensive programme.

The Ethos-led consortium includes subsidiaries of Goldman Sachs and real estate investment funds managed by Goldman Sachs, broad-based empowerment groups with an existing stake in Gold Reef, and some Gold Reef managers.

In Gold Reef’s interim results to June, it said it had concluded a number of empowerment transactions that became unconditional on June 25, increasing direct black shareholding to more than 25,1%.

Richard Moloko, representing the empowerment grouping, said the group would acquire another 4,9% in the leisure company.

Ethos CEO Andre Roux said the deal was likely to go through as the company had irrevocable undertakings from about 80,5% of shareholders . He said about R10bn would be paid to shareholders, with the balance being used to pay back the existing financiers.

The deal would be partly funded through debt, allowing the empowerment partners to increase their stake. Roux expected the consortium to buy out minorities and acquire all the holding.

Roux said the consortium was keen on Gold Reef as it was “very” cash generative and had recently secured the Silverstar gambling licence, the last to be awarded in Gauteng.

Silverstar was expected to open in the first quarter of next year on the West Rand at a cost of R1,2bn. It would have 700 slot machines and 30 tables, and a hotel, restaurants and conference and entertainment facilities. Gold Reef Resorts CEO Steven Joffe said management supported the offer.

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