Tribunal examines Tsogo-led consortium’s bid to buy Emerald

The Competition Tribunal has begun its probe into the proposed multimillion-rand acquisition of Emerald Hotel Resort & Casino by a newly registered company that is controlled by Tsogo Sun Gaming Company called Newco.

The 25-year-old Emerald has been battling financial and operational difficulty and is in dire need of a capital injection to rejuvenate its ageing infrastructure.

Tsogo Sun Gaming owns casinos, Galaxy Bingo sites and VSlots operations throughout the country, while Emerald is located on an estate on the banks of the Vaal River.

Referred by the Competition Commission, which recommended that the proposed transaction be approved with conditions, the matter before the tribunal was chaired on Thursday by Liberty Mncube alongside Thando Vilakazi and Yasmin Carrim, who heard submissions on the proposed merger.

The commission’s Zanele Hadebe explained the body’s rationale for giving the deal the green light, saying analysis showed there is no overlap between the casinos in Gauteng. “We believe that the transaction does not raise substantial competition issues,” said Hadebe.

While the deal passed the commission’s litmus test, Hadebe said there are concerns raised by the market about the level of concentration and market position Tsogo would assume if the merger, which would see the hotelier own four out of seven casinos in Gauteng, got the go-ahead.

SA has 41 casino licences, which are divided among the provinces by the National Gambling Board.

In Gauteng, Tsogo holds the licences for Montecasino, Gold Reef and Silver Star casinos.

Among other concerns raised are the possibility of Tsogo purchasing the establishment and licence and then applying for relocation, threatening the value chain and small businesses that have mushroomed in Vanderbijlpark.

But the potential buyers confirmed they would not relocate the casino or licence. They agreed to no retrenchments for two years and to invest into infrastructure of the facility over the first five years.

“There is no intention to relocate” Anthony Norton, speaking on behalf of Newco, told the tribunal. “It’s a very expensive, cumbersome and difficult regulatory process and we don’t intend to do that.”

Tsogo’s Jan de Lange told the tribunal panel that consumers are increasingly leaning more towards online betting, as reflected in revenues generated. The trend was catapulted by pandemic lockdowns and is maintaining momentum, while casinos are still not back to pre-pandemic levels of occupancy.

“There is a huge increase in online betting,” De Lange said, adding that it is also evident in the number of online licences granted by the authorities to licensees.

Online betting, particularly of sports, is quickly becoming one of the most popular entertainment forms in SA.

Data by provincial gaming boards presented to the panel by De Lange reflected that gross gaming revenue in Mpumalanga increased from R200m in quarter four of full-year 2019 to R1.2bn in quarter four of full-year 2021. In the same period casino gross revenue fell from R200m to R140m.

A similar trend was observed in the Western Cape where gross gaming revenue increased from R300m to R1.3bn in the same period while casino revenue dropped from R760m to R590m.

“The gross increase in gaming revenue is really attributable to online revenue, which has increased in Mpumalanga by about 600% and in the Western Cape by about 500%,” De Lange said.

Tsogo Sun unbundled its hotel business in 2019, with Tsogo Sun Gaming and Tsogo Hotels being listed separately on the JSE.

The casino division, being the largest division in the Tsogo Sun Gaming stable, has had its resilience tested over the past two years by lockdowns, trading and other restrictions, riots, flooding, load-shedding and a fragile economy.

Tsogo Sun Gaming’s share price added 0.37% to R10.80 on Thursday.

gumedemi@businesslive.co.za