The absolute garbage that masquerades as management at Sky City Entertainment has got to come to a logical conclusion some time soon.
The lobby of the 5 star Sky City Grand Hotel The company let the market know that the only remaining suitor, which was rumoured as US private equity funds TPG and Apollo Management, was still attempting to arrange financing for a takeover bid.
Sky City management have been effusive, misleading and amateurish in their attempts to keep the market informed accurately and sheppard a deal with a prospective buyer.
If market experience from this end is as deficient as we know it, one can only imagine how the prospective buyer was treated.
Were Sky City management clear, precise and upfront with the two rumoured funds?
I seriously doubt it.
Now I'm not displeased that a deal looks like it is going to fall through but can you imagine this motley crew turning around the company and having the potential to put things back on track?
Not bloody likely mate.
Brook Asset Management, a large Sky City shareholder, has been angling for a board clean out for a long time and I would have to concur with that, for I cant see a way forward with sub standard people at the helm.
TPG and Apollo Management have apparently fallen short in the moola stakes because of the global "credit crunch" but I'm finding that a little hard to stomach considering the timing of the initial bid interest in September and at that time easy credit had already become a thing of the past.
What shareholders need is a clear assessment of where things are with any bid and it is certainly not up to Sky City management to wait around for a possible buyer to raise funds.
There needs to be an understanding from this last possible bidder that they are serious, give them a definite deadline-Sky City management have moved their deadline several times-and if they are not interested tell them to bugger off so we can all move on.
Without the current board of course.
You can bet the current state of indecision will also be permeating the business side of the company as well, not forgetting the considerable amount of money it will be costing shareholders in putting any bid together.
The current credit crunch could turn out to be a blessing in disguise.
With the private equity boom earlier this year we saw cheap money being used to buy public companies at hugely over inflated values and it looked like it was going to escalate to the point of explosion and huge economic destruction looked certain.
This fallout was gazumped by the sub prime blowout where lunatic lending institutions lent money to private individuals for houses, cars and other goods and surprise surprise they couldn't pay their loans back.
The effect of the latter scenario though is the same outcome that would have happened had the private equity boys been allowed to continue to borrow money from the drunken sailors that were lending it to them- the credit market is very tight and bankers don't trust anyone all of a sudden.
Credit is tight right now, it has slowed down US M and A activity, the housing sector and investment in business expansion and will have further downstream effects as time wears on.
In New Zealand we have seen questions over our own finance companies going bust, 13 in the last 24 months or so and with more to come. They lent money to questionable property developments and car and chattel purchases and have cost a collective NZ$1.5 billion so far.
A major takeover of a large New Zealand company, Sky City Entertainment, is in peril because a couple of the interested private equity partners are having trouble raising cheap credit to purchase the casino and entertainment company.
What is the blessing?
Well, all this recklessness, which the financial world seems to like to go through with monotonous regularity, has put a brake on stupidity and seems to have focused the minds of lenders and borrowers.
Unfortunately the lenders have pulled back way too far and don't want to get their wallets out at all but the overreaction seems a mirror reaction to the gay abandon that they handed out dollars to anyone in a suit in the first instance.
These overreactions always happen and lenders will start to loosen again when trust is back in the market.
The focus from the beginning then, one would hope, that the reasons for lending money in the first case would pass the basic questions from the lender when one asks for credit.
Can he pay it back?
Is his credit history good?
In the case of a business, much the same but with the addition of whether the business makes money and are you paying too much for it.
Simple huh?
Then how come lenders got themselves and as a consequence, us, in this mess in the first place.
News yesterday that Sky City Entertainment Group Ltd [SKC.NZX], which has been in play for the last 3 months, has probably only got one interested party left that wants to buy the company is music to my ears.
Reportedly there had been "several" interested parties with one, United States- based private equity TPG Newbridge Capital with Apollo Management, doing due diligence and one other "serious" bidder.
As I have ranted on before Sky City is worth a whole lot more than the rumored $NZ5.50-6 per share that has been talked about. It is a monopoly in all the markets it operates in and has some seriously good assets that have been mismanaged to the point where another party thinks it can take the company for a bargain price.
One reason cited for difficulties with parties looking over the company making offers was the current climate of fear over raising debt and the cost of that borrowing.
Shareholders will be expected to hear a definite outcome at the time of the board meeting on December 5 and 6, according to Sky City Management.
I'm still a little unclear as to when shareholders will know about the Cinema division sale because the deadline has changed so many times but as I have mentioned before the sale of this asset should return a special dividend back to owners.
The only questions that are left to answer are who the new CEO is going to be and whether he or she will have a clear direction as to where the company is going and whether he can inspire the motley crew that are currently there with their feet under the boardroom table to follow his direction.
The stock was punished on the news today with the share price down 30c to $4.90 on big volume of 25 million dollars.
The announcement yesterday of a possible listing on the NZX by New Zealand's biggest company, Fonterra, is the best news the New Zealand economy has had in generations.
Fonterra, a global milk products producer, manufacturer and exporter is a huge contributor to NZ Inc and the company has become a dominant force in the Global Dairy products boom.
It has now got to the point though, that it needs some serious capital to allow it to grow larger and compete with the likes of Nestle, Danone and Kraft. Fonterra's cooperative structure doesn't allow the company to raise the capital needed to foot it with the other big boys as the dairy industry players grow in size, through acquisitions and mergers.
There has been much bleating by Unions and the NZ First Political Party that the proposal isn't a good idea but frankly as Unionists and pollies what the hell would they know about business.
This is great news for Fonterra and its long term future and excellent news for New Zealand investors as they will be able to participate in an industry that dominates our export revenues and economy and contribute to the investment of a great business.
TheNZXis going to be more indicative of our economy by having Fonterra listed, possibly sometime in 2010, and the index will get the much needed boost that it has lacked all these years simply because of the impact the company has in our economy.
A cash cow indeed.
Sky City twiddling thumbs in the back row
Sky Tower, Auckland, NZ
News this week that Sky City Entertainment(SKC) is not likely to be able to tell the market anything about the 3 companies currently looking over SKC's books and what their intentions will be until "after Christmas" leaves this writer wondering how far management can stall shareholders any longer.
The timetable initially stood at an announcement at the end of October, then mid November and now after xmas. It makes me wonder how serious prospective bidders might be and doesn't inspire confidence in a good price for the company or a sale at all.
In other company news, contenders for SkyCity Cinemas - which could be worth as much as $116 million - are understood to include Australian firm Greater Union, US-based Reading Cinemas and Hoyts, previously a partnership between PBL and West Australian Newspapers, which was purchased by Australia's Pacific Equity Partners.
The vagaries of management speak are truly alive and well at Sky City, this from the company November 14:
SkyCity said yesterday it did not expect to progress with the cinema sale before the end of November.
What the hell does that mean, will they give a bloody deadline?
Sky City Management surely must be nominees for the worst board for 2007.
Morrison speaketh with forked tongue
I'm having trouble taking Lloyd Morrison seriously.
Morrison, the chief executive of Infratil, a director of Wellington Airport and a backer of a second airport for Auckland at Whenuapai has $300 million invested in Auckland Airport(AIA) on behalf of Infratil and the NZ Super Fund.
The trouble with this though is that Morrison's directorship of Wellington Airport and backing of a second port in Auckland put him in direct conflict with his large ownership of AIA shares and his ambition to get a seat on the AIA board.
Morrison says there is no conflict but it doesn't take a genius to figure out that he is staining credibility paper thin if he thinks that.
He was caught out today on National Radio Business today and last week when he said that the Canadian Pension bid was too low at $NZ3.65 and mentioned a price north of 4 bucks per share as being fair value for the company.
Interesting take when you consider than Infratil was involved in a bid, earlier this year, that was rejected by the board as too low, probably below the Canadian bid.
Morrison is a savvy investor and he is using subterfuge, doublespeak and attacking competitors in his bid to get some sort of control in the Auckland Airport deal/s.
While the AIA board hasn't been straightforward with shareholders over the last 8 months of this protracted bid for control of the port, Morrison's intentions are not clear and he cannot be trusted and shouldn't be elected to the AIA board on November 20.
In takeover news, Canadian Pension Plan Investment Board (CPPIB) has made a formal bid for AIA today.
The key terms of the offer are as follows:
Offer Price: The consideration offered for each Outstanding AIAL Shares taken up under the offer is $3.6555 in cash.
Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or controlled by the Offeror
Closing time: The Offer closes at 5.00pm on 13 March 2008 Partial Offer: The Offer is for 39.53% of the AIAL Shares not already held or controlled by the Offeror
Closing time: The Offer closes at 5.00pm on 13 March 2008
Hollow words, hollow competition
The owner of Share Trader and many other financial based sites in New Zealand threatened to "take legal action" over this revelation published in the Share Investor Blog a month ago and insisted it be removed and an apology made but as yet has failed to serve me with a writ.
This individual also made a threat of "legal action" over my use of "Good Returns Bookstore" banners on my site back in July even though I was legitimately using them as a genuineaffiliate.
Now I don't take kindly to threats and I am justly annoyed by this pest, but I guess threats ring pretty hollow when you use them as your modusoperandi when doing business and don't follow through.
Good Returns Bookstore, owned by Tarawera Publishing, continues to spam me with emails to buy their books, even though I canceled my affiliate membership and Tarawera'sSharetrader continues to host my contributions on their site, even though I didn't sign up to their new draconian membership terms and conditions(see the fee for spamming!!) as part of Tarawera taking over the site.
*Incidently you can buy all types of finance books from my Share Investor Bookstore, the range is many hundreds of times larger and at least 30% cheaper than Good Returns Books.
Sort yourself out Phil!
Learning to love China
World markets have been nervous again over the last few weeks. The Dow has slipped from over the 13600 mark to just above 130000, oil has reached almost 100 bucks, gold is over US$800 and the US dollar is doing an impression of a tiger moth with one wing.
Shakiness over future sub prime losses for banks and financial institutions have been blamed and to be sure there is more to come once sweetheart mortgage deals end but like any market jitters the market tends to overreact.
I think what could be happening now and we wont really know it for sure until we look back, is that we are partially seeing the start of the transition of dominance from the US as the financial and economic powerhouse to China. To be fair it ain't there yet but early signs seem to be showing the genesis of something akin to an economic transition.
The low value of the Yuan and the Chinese economy powering ahead means their economy will only power ahead in the future, while the US, a massive importer of foreign made goods is struggling as their dollar sinks and imports cost more.
Also the US as a safe haven for foreign investment is being eroded as their interest rates plummet and the cost of repaying debt to China gets ever more expensive.
The transition of America from a manufacturer to their home market and huge importer to a bigger exporter must come and will be easier to do as their dollar drops against their main trading partners.
It is then China will be seen as an opportunity to US manufacturers instead of a threat and the whole cycle of economic change will start again.
Let us remember that China was an economic powerhouse once before.
NZX Market Wrap
The NZSX-50 index, closed up 1.1 points at 4114.2, on turnover valued at $138.5 million.
Auckland Airport fell 3c to 301, after Canada Pension Plan Investment Board (CPP) submitted its formal cash bid for 39.53 per cent at $3.6555 per share. The airport company has also asked its advisers to seek other offers.
AIA shares had earlier risen to 308 before profit takers moved in. Turnover was a heavy $46.8m.
Fisher & Paykel Appliances rose 4c to 364, having gained about 30c since its first half result last week. The company is also considering selling its finance company to focus on its whiteware manufacture and retailing businesses.
Market heavyweight Telecom gained 4c to 425, Fletcher Building was up 8c at 1166 after being caned for most of the last week or so, and Contact Energy lost 5c to 885.
F&P Healthcare was up 3c at 328, Sky City gained 5c to 537 after getting knocked about yesterday after a broker downgrade. Sky TV lost 8c to 562, and Vector recovered some of yesterday's 6c loss to close up 3c at 233.
Air NZ, which has had a rough ride recently due to rising fuel prices, rose 1c to 202.
Among other stocks to gain, NZX was up 5c at 961, Freightways rose 2c to 380, Infratilwas up 2c at 293, Nuplex gained 5c to 725, and carpetmakerCavalier was up 3c at 315.
Hellaby Holdings lost 2c to 271, despite news it was trading ahead of last year, when it posted its first loss since re listing in 1994.
Rakon fell 5c to 515, Tower was down 4c at 204, HallensteinGlasson lost 3c to 445, Mainfreight was 5c lower at 710, and The Warehouse was down 2c at 522, marking time while waiting for a decision by the Commerce Commission as to whether Woolworths or Foodstuffs can make a bid to takeover the company.
No not Sergeant Peppers Band but the Great Stock Market Meltdown of 1987.
I didn't follow the Stockmarket 20 years ago. I vaguely recall a news incident at the time but didn't equate it with anything serious.
I was living in Sydney at the time, so the fallout from it wasn't as bad as it was apparently in New Zealand.
My introduction to the Stockmarket came almost exactly 10 years later, when I bought shares in the fast food operator Restaurant Brands (RBD)
Since then I have taken a great deal of interest in equities and my 10 years invested in it has taught me much.
Investing in the NZX has given me an appreciation of business, how fear and greed work in financial markets and most of all made money for me.
The biggest lesson that I have learnt is from losing money in a couple of stocks. That hasn't dulled my obsession with the market though.
Craig Heatley (left), and Allan Hawkins after Rainbow Corporation lists on the Stock Exchange in the mid 1980s
Unlike some who lost their shirts and more back in 1987 my loss wasn't very large and thousands of Kiwi investors haven't forgotten those heady days and wouldn't touch the sharemarket with a barge poll today.
The New Zealand Sharemarket was one of the worst affected back in 1987 and still hasn't recovered from the hit that it took. Most other global markets have multiplied their values many times in the last 20 years. The US market is now worth more than 5 times what it was worth all those years ago.
True, the NZ Stockmarket is a much more stable and regulated market than it was back in those wild west days but there are still some negative elements that linger today, most notably the insider trading that is done by NZX sanctioned broker firms and management of its listed companies.
Lets hope for a more positive next 20 years. NZX's Mark Weldon is doing a good job so if he straightens the rest of the markets kinks out then we might get somewhere.
Burger Fuel Shares get a Fuel Injection
Burger Fuel Outlet
It hasn't been only the global oil prices climbing lately.
Burger Fuel(BFW) the New Zealand based gourmet burger maker, has had its shares climb from a low of NZ$.60c to 70c over the last week.
On very low volume again but the down trend has reversed.
No news about how the new Kings Cross outlet is going and I will be waiting with with great anticipation for the lowdown.
Good news for this outlets sales will push shares a lot higher.
The Dice get Fluffy
First it was then it wasn't and now it is again.
Sky City Entertainment(SKC) the casino, hotel and cinema operator had its shares halt trading for 15 minutes on Monday because the NZX feared that the company was trading without full disclosure to the market.
Sky City Metro, Auckland City
This was because there had been rumours that another company had approached SKC management with interest in the entertainment group mainly because a director of the company mentioned it to a reporter on Sunday.
This was initially denied then days latter it was confirmed by SKC management itself that there would be indeed another "interested party" doing due diligence with a view to buy the company.
The other company is possibly US private equity firm TPG which is examining the books of SKC, sources familiar with the matter said today, with any bid seen worth over $US2 billion ($NZ2.7 billion).
The new contender is unnamed.
The complexity and ups and downs with the possible takeover of SKC has seen much confusion and speculation over the last 3 weeks since the M & A speculation was mooted.
I'm still hoping the buyout is a failure because I see more value in the company long term and substantial capital returns to shareholders as cinemas in New Zealand and the Adelaide Casino go on the block.
Fishing for returns
Fisher Funds, the highly successful New Zealand fund manager is currently offering what could be a good investment in years to come, if their track record is anything to go by.
Their New Zealand and Australian listed investment funds have done very well since their inception, with excellent returns so far.
Their latest offering is Marlin Global Limited. "Marlin will provide investors with access to a handpicked portfolio of outstanding growth companies selected from around the world", according to the company website.
This is an excellent way to get exposure to global markets without the attendant fees and taxes to complicate things.
You can download a prospectus here but keep in mind that it may not perform as well as Fishers other funds.
I may apply for a small parcel myself.
The Dots get the Hots
Dominos Australia wants a slice of the Global Pizza Market.
Doing what our domestic Pizza Franchisee with the Pizza Hut license, Restaurant Brands couldn't do, the Australian arm of US giant Domino's is successfully expanding overseas.
It will open at least 35 stores in Europe each year until it reaches 1000 stores, betting on rising demand for home delivered food.
Domino's has a total of 667 stores, with 404 in Australia, 65 in New Zealand and a combo of 198 in France, Belgium and the Netherlands.
Restaurant Brands delivered appalling results when it bought the ailing Pizza Hut chain in Victoria Australia in 2000, with a total of around 60 stores.
Poor management was unable to turn company fortunes around and RBD has now almost finished selling their OZ arm after losing 10s of millions of shareholder dollars.
The pizza biz is a very competitive industry but if Domino's OZ expansion works then their slice of profits will get bigger.
Today, the NZSX-50 benchmark index closed up 3.2 points at 4316.31, just 26 points below May's record high. Turnover was light, totalling $89.2 million. Air New Zealand(AIR) rose a cent to $2.12, Steel and Tube (STU) fell a cent to $4.38, Michael Hill(MHI) lost 20c to $10.30.
Carpetmaker Cavalier(CAV) was even at $3.25, Tourism Holdings(THL) dropped 16c to $2.32, Nuplex(NPX) fell a cent to $7.69 and NZ Refining(NZR) jumped 18c to $7.70 stimulated by rising world oil prices.
Fletcher Building(FBU)was up 4c at $12.38, F&P Appliances(FPA) was flat at $3.70 and F&P Healthcare (FPH) down 4c at $3.34.
Telecom(TEL) rose 2c to $4.54, while Contact Energy(CEN) was a cent higher at 943.
Sky TV(SKT) was up 9c at $5.95 amid talk over the company's planned on-market buyback. Small shareholders have been advised to vote against the buyback, which would increase the stake of Rupert Murdoch's News Corp to around 45.95 per cent, and possibly over 50 per cent eventually.
Sky City(SKC) was up a cent at $5.48, having added 7c yesterday over takeover activity.
Auckland Airport(AIA) rose 1c to $3.08, Freightways(FRE) was up 7c at $3.98, NZX climbed 10c to $9.50, and Rakon(RAK) was up 13c at $5.19, possibly over speculation of a good profit statement.
As you may or may not know, Sky City Entertainment Group [SKC.NZ] is under a possible takeover offer.
Much has been written about the possibility of this happening over the last few weeks including a reasonable bit by myself.
You may also know that I don't want to part with my shares, I am a long-term holder and the possibility of a sale doesn't excite me as it appears to have excited some.
I also believe a possible bidder will try and grab the company for a bargain basement price, the "above 6 bucks at share" price has been mentioned many times by a multitude of market commentators.
I personally wouldn't be interested in such a valuation as long term it is worth much more than that.
It is a virtual monopoly wherever it operates and a substantial premium above 6 bucks needs to be paid to take control.
I would ask any Sky City Shareholders to contact me, Darren Rickard at shareinvestornz@gmail.com if they are interested in getting a group together to oppose any definite sale/and or stand firm for a better offer.
Sign O' the Times Monday morning I get an expensive looking flash black annual report in my mailbox from Auckland International Airport(AIA) and it comes festooned with the artistic equivalent of the anarchy symbol used by the punk rockers in the 70s and still used today by the wanna bees. The logo is part of an expensive "re branding" exercise where the use of politically correct jargon and references to Maaoori and global warming are used liberally to suck up to just about anyone who is anyone, except if you are a shareholder. This might give you some sort of idea: Chairman John Maasland said the company has adopted a new vision of "representing our country, and new core values of being outstanding, uniquely Kiwi and welcoming".Do shareholders really need to shell out hundreds of thousands of dollars so AIA management can tell us what they will be doing but should have been doing all along anyway? I have canvassed this sort of managerial mumbo jumbo before and it is nothing more than MBA spin, an exercise to make management feel better about themselves and submit an image to the public that is all surface and little substance. Really an excuse for mediocrity. Port in a Storm In the wake of strikes this week at Ports of Auckland, POA, it seems owners of the now publicly owned port , Auckland Regional Holdings, ARH have refused to talk about the reasons why they put a buzz saw to the marriage between it and the Port of Tauranga (POT) The Cameron Report, done by an investment banker, points to widespread efficiency gains from the tie up of the two ports. Efficiency gains would have resulted in more streamlined ports operations with bottom line benefits for customers. Judith Bassett, ARH chair and ARC councillor has refused to release the report. Industry insiders say the possible gains were worth more than $50 million a year. The Port of Tauranga is a much more efficient beast than POA and it seems jealousy over this and arguments that POT management wanted a bigger slice in the marriage because of their ports efficiencies may have sunk the merger. As an outsider and ARC ratepayer myself one has to ask oneself what are ARC councillors hiding? It cant be good and clearly wont be released until after local elections in a week or so. It probably wont be the end of port consolidation in the future between these two parties because it just makes financial sense to do so. Ironically while POA's profit dived for 2007, POT's was up sharply. Amazing what can happen to a company when it is abused by politicians. Dow High? The Dow hit an all time high this Tuesday (US Time), with the index up strongly by 191.92 points to close at 14,087.55. It seems the banking and finance sector has made a comeback after the sub prime meltdown and all has been forgiven and forgotten as investors flocked to the sector. The S&P 500 Financial Index rose 2.1 per cent, the biggest gain among 10 sector groups. Merrill Lynch, the third-largest securities firm, leaped US$2.59 to US$73.87. JPMorgan Chase, the third-biggest US bank, rose US99c to US$46.81. Doubts still remain over how the "credit crunch" will really impact this sector as the bulk of "sweetheart" mortgage deals in the sub prime area that caused the meltdown, where lenders have a lead-in low interest rate on their mortgages for 6 months or so , have yet to fully hit the market. Keep watching, I will! Its a Mans World, Baby Much fuss made in mainstream media circles this week over the apparent dearth of women CEO's running companies in New Zealand. This in the wake of Di Humphries' decision to leave the top job at Glassons, a division of the clothing retailer Hallensteins (HLG) Names such as Vicki Salmon, former head of Restaurant Brands(RBD) and Teresa Gattung, former head girl at Telecom New Zealand (TEL) were bandied about as examples to be admired. Sadly these two were both monumental failures at their respective positions. Gee, how about company heads being picked because they are good at what they do, if they happen to be men or women it doesn't matter, as long as you have the best person for the job. Call me simple but I am just a man. Humphries' is off to look after her young family. A very important job, if I do say so. Financial Impact The fallout from the dodgy finance company industry rolls on again this week. Hanover Finance, one of New Zealand's biggest finance companies is to cut its Australian staff from 44 to 32. Hanover has been busy rebranding itself with an expensive advertising campaign as a warm , friendly, safe and solid industry player. I'm still a little wary over this and other companies and their long term future in lending. Even Hanover's size wont protect it from going under and there are rumours going around about its stability. Even the State Kiwibank, the loss making division of NZ Post, has reportedly done 6 million taxpayer dollars in the Northern Rock collapse in the UK. One has to wonder why it was invested there. Auckland-based investment firm Clegg & Co Finance has been placed in receivership this week. NZ $15 million of investors money is at risk. On August 28 Brian Clegg, the director of Clegg and Co, wrote to investors written under a Classic Finance letterhead:
He writes about the publicity surrounding the collapse of finance companies, but believes his company is one of the "safe" ones, because it was "still operating profitably and successfully in accordance with our lending policy", and had kept out of high-risk lending.
In yet another collapse, investors in Five Star Consumer Finance heard today that they would expect to receive back 26c to 40c in the dollar on money invested but nothing forthcoming until December. Ladies and Gents, please place your Bets By Reuters | 05 Oct 2007 | 12:39 AM ET with comments by Share Investor
New Zealand casino operator Sky City Entertainment Group(SKC) sees the possibility of more than one bid, as a potential buyer looks at its books over a deal that could be worth around 1.9 billion.
Executive Director ElmarToime told Reuters on Friday that the unnamed bidder's decision to conduct due diligence could spark other bids.
"The interest is there, whether the timing is right, or people have the wherewithal is the great unknown," Toime said.
Sky City, which has a virtual monopoly on casinos in New Zealand and also operates in Australia, has been actively seeking buyers since receiving the approach in late September.
Earlier on Friday, the Australian Financial Review newspaper said private equity group TPG was the favourite to take over Sky City after another private equity firm rumoured to be interested, New York-based Providence Equity Partners, did not make a bid.
Australian competitors of Sky include Tabcorp Holdings, Tattersalls and Publishing and Broadcasting Limited. Tabcorp and Tattersalls have said they are not interested.
Shares in Sky City last traded unchanged at NZ$5.36, having gained 9.2% so far this year, compared to a 5.5% gain for the benchmark top 50 index.
Toime would not give the identity of the unnamed bidder, but said it was due to complete its due diligence on Sky City by the end of October. He also declined to comment on the Australian
Financial Review article
Private equity and Asian gambling operators have been touted as the most likely source of bids.
The sector in New Zealand is tightly regulated, and Toime said he was unsure if a bid by a foreign party to takeover Sky City would attract political or regulatory opposition.
Citigroup has said in a report that recent Australasian casino deals had an average enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA) ratio of around 10 times.
That would indicate a private equity bidder paying about NZ$5.60 a share for Sky, valuing the company at $1.9 billion, said Citigroup analyst Andy Bowley.
In May, Sky City unveiled a programme to cut NZ$33 million in costs over 18 months, and said it might sell its Adelaide casino in Australia and one in Christchurch, as well as its cinema business.
Toime said indicative bids for the cinema business were expected by the end of October. As I have said before, I wouldn't be willing to sell my SKC holding for anything like $NZ 5.60. It is worth a substantial premium for control and an offer of $5.60 would be quickly rejected by shareholders. NZX Market Wrap New Zealand shares dipped today in light trading at the end of a quiet week. The NZSX-50 index, which yesterday lost 0.6 per cent, was down 15.93 points or 0.4 per cent at 4284.05. Turnover was an unimpressive $NZ109.7 million, and falls outnumbered rises 53 to 35. Top stock Telecom(TEL) which returned $1.1 billion to shareholders today and cancelled one share in nine, fell a cent to $4.56. Sky City(SKC) rose 3c to 539. The Australian Financial Review said today that private equity group TPG was in the lead to buy the casino operator after Providence Equity Partners disclosed that they hadn't made a bid. Fletcher Building(FBU) fell 31c to $12.20, continuing its pattern of large moves in either direction. Contact Energy(CEN) was steady at $9.35 after dipping yesterday due to indirect regulatory scares, Fisher & PaykelHealthcare(FPH) was up 7c at $3.34, F&P Appliances(FPA)rose 2c to $3.55, and Auckland International Airport(AIA) dropped 3c to $3.09.
Lines company Vector(VCT) was up a cent at 238, having lost 10c yesterday after the Commerce Commission said in a draft determination it would impose 15 per cent price reductions on its gas distribution business.
Among other stocks to go south today, The Warehouse(WHS) lost 7c to $5.37, Ebos (EBO)was down 11c at $5.04, Air New Zealand(AIR) lost 2c to $2.36, and Rakon(RAK) was down 4c at $4.80. Pumpkin Patch(PPL) fell 5c to $3.05 today and has continued to spiral downwards over the last few weeks due to US dollar weakness. HallensteinGlasson(HLG) was down 6c at $4.50. Guinness Peat Group(GPG) was up 2c to $1.95, Port of Tauranga(POT) gained a cent to $6.96. Dual-listed stocks posted bigger gains, with ANZ up 40c at $35.90, Lion Nathan(LNN) up 20c at $10.95. NZ Refining(NZR) was down 9c to $7.81 on lower oil prices and refining margins. Disclosure I own SKC and AIA shares c Share Investor 2007
