Gold Reef Tsogo merger creates South African gaming powerhouse

Brewing giant SABMiller plc said that the transaction would be effected through the acquisition by Gold Reef of the entire issued share capital of Tsogo Sun in exchange for the issue of new shares in Gold Reef. 

Under the terms of the merger, SABMiller will exchange its 49% interest in Tsogo Sun for a 39.7% interest in the enlarged Gold Reef/Tsogo Sun business, which will continue to be listed on the Johannesburg Stock Exchange with an expected market capitalisation of approximately $2.7 billion.

SABMiller said that the merger would not only create a premier gaming and hotels company in South Africa, but also improve the enlarged company's ability to capture opportunities for growth, both organically and through acquisition.

Commenting on the proposed merger, Tsogo CEO Jabu Mabuza said: “This transaction heralds the creation of a significant entity in the gaming and hotel industry in South Africa. The merger of two quality portfolios and listing on the JSE provides investors with exposure to diversified markets and geographies. We will look to capitalise on the new growth opportunities that this merger brings.”

South Africa represents an increasingly attractive market for gaming operators with a number of European companies recently announcing their entry into the market.

In September 2009 Tsogo Sun entered into an exclusive agreement with 888’s business-to-business subsidiary Dragonfish to establish a joint venture to offer sports betting under a new TSG online brand and to promote the 888 brand in South Africa, with plans to expand into poker, bingo and casino gaming when regulations allow.

The agreement also gives 888 access to a broad market in South Africa through integration with TSG’s extensive database.

Other recent market entrants include British bookmaker Ladbrokes who formed a joint venture last week with KaiRo International to launch an online sportsbook, as well as Victor Chandler who recently received licence approval from the Western Cape Gambling and Betting Board.