Goldmans Gambles On South Africa
Investment bank Goldman Sachs is to make an unusual foray into South Africa by backing a $1.3bn (£644m) private equity buyout of casino company Gold Reef Resorts. Last night it emerged that Gold Reef had agreed to an offer from a private equity group including local buyout firm Ethos Private Equity, black economic empowerment shareholders and Goldman Sachs for 34 rand a share, or about 9.85bn rand (£684m).
Goldman Sachs is understood to be providing equity and debt to the bid vehicle in a deal that will be the second largest private equity buyout in South Africa.
The bank is also advising the bidding consortium led by Ethos, a fund of 5.4bn rand, the largest pool of private equity capital raised for investment in Africa. Ethos's previous investments include Moresport, a sports retailer, and Dunlop, the tyre and sports equipment maker.
The Gold Reef deal comes as several debt-funded buyouts have stalled or failed amid a tightening credit market. However, sources familiar with the matter said the debt financing from Goldman Sachs is committed and unconditional.
Gold Reef's operations include the Gold Reef City casino and theme park south of Johannesburg and the Goldfields Casino in Welkom, south-west of Johannesburg. Some of its shareholders are believed to be the Krok family, who made money out of skin-whitening cosmetics under apartheid.
In December, Gold Reef said it had been approached by several bidders. Harrah's Entertainment, the world's biggest gaming company, is understood to have been one of them. It is thought Harrah's planned to merge Gold Reef with the South African operations of London Clubs International, which it bought for £280m last December.
Gold Reef shareholders completed a deal earlier in the year that raised the black empowerment shareholding to 25.1pc.
The move made Gold Reef, which is currently being advised on the buyout deal by Merrill Lynch, more compliant with the code of practice of the South African gaming industry, meaning it would have better prospects of retaining its gaming licences. Gold Reef could not be reached for comment.