Thumbs up for Gold Reef merger
Business Report
28 April 2010

Audrey D’Angelo

A majority of 99 percent of shareholders in Gold Reef Resorts voted at a general meeting on Monday in favour of a reverse takeover of the company by Tsogo Sun.

Senior executives of the companies agreed last year to a proposed merger through the acquisition by Gold Reef, of the entire issued share capital of Tsogo Sun from Tsogo Investment Holding Company and SABSA Holdings, subject to meeting conditions precedent, including the approval of the competition authorities and gambling boards.

The Gold Reef executives were at first worried by the gradual acquisition by Tsogo of a substantial shareholding in Gold Reef, which they feared would cause the company to lose its black economic empowerment (BEE) rating.

But after negotiations, they agreed that a merger would be to the benefit of Gold Reef.

Stephen Joffe, the chief executive, said then that the fact that Tsogo Sun, whose wholly owned subsidiaries include the Southern Sun hotel chain, had overseas operations that would be of benefit to Gold Reef shareholders. He said that Gold Reef would have to look at expansion overseas because opportunities in this country were limited.

On Friday the directors reported revenue of R532 million for the first quarter, a 2.7 percent compared with the same period last year.

They said this was primarily due to a 3.2 percent drop in the Gauteng gaming market, "exacerbated by a strong tables performance at Gold Reef City casino in the comparative three months last year".

But, they said, all other provinces in which the group operates showed revenue growth compared with the same period last year.

The directors expected tough trading conditions to persist into the second quarter of this year "with consumer activity likely to remain subdued".

However, they considered the group well positioned to benefit from an improvement in economic conditions, with the World Cup taking place in June and July when most of the games and visitors from overseas will be in Gauteng.

But, the directors said, focus on costs would remain a priority and Gold Reef would continue to pursue development initiatives in its casino portfolio.

The major refurbishment of the Golden Horse casino in KwaZulu-Natal was completed in the past three months.

The shares fell 1.2 percent to R18.28 on Monday.

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