Johannesburg – Sun International Limited’s move to acquire Peermont Holdings – the company that owns Emperors Palace – has hit a snag after the regulator raised concerns about reducing competition in the gambling industry.
At the weekend, the Competition Commission said it has recommended that the Competition Tribunal prohibit the proposed transaction whereby Sun International Limited intends to acquire Peermont.
Both Sun International Limited and Peermont are involved in casino gambling.
In a statement, made available to The Bulrushes, the Competition Commission on Sunday, (27 October 2024), said: “The Commission found that the proposed merger is likely to substantially prevent and/or lessen competition in the provision of casino (gambling) services in South Africa and in central Gauteng”.
The statement added: “The merger significantly changes the structure of the national market by reducing the number of national casino operators from three to two.
“Post-merger, 92% of the casinos operating in South Africa would be owned by only two firms, further increasing concentration in an already highly concentrated market.
“New entry into this market is unlikely due to the limited availability of casino licenses.
“In central Gauteng, in particular, there are no unallocated casino licenses.”
The Competition Commission said that, in addition, the merger would result in Sun International Limited owning and operating several casinos located in prime locations, which would give it a significant competitive advantage over its competitors.
In central Gauteng, the merger would reduce the number of casino operators from three to two and would remove Emperors Palace (currently owned by Peermont) as an effective competitor to Sun International Limited’s Time Square and Carnival City as well as Tsogo Sun’s Montecasino.
This may result in SISA being able to retain a greater proportion of bets staked by gamblers as a result of weakened competitive constraints, thus dampening competitive rivalry in central Gauteng.
The Commission said it was also concerned that the merger is likely to result in the two remaining casino operators (Sun International Limited and Tsogo Sun) in central Gauteng behaving co-operatively instead of competing with each other.
“For instance, the two remaining casino operators in central Gauteng can reduce the level of winnings and reduce promotions in the knowledge that there will be no competitive response,” the Commission said.
“Having considered the remedies tendered by the merging parties, the Commission is of the view that the remedies do not adequately restore competition that would be lost due to the proposed merger.
However, the Tribunal will make a final decision on the matter.
BACKGROUND
The primary acquiring firm, Sun International Limited (SISA), is a wholly owned subsidiary of Sun International Limited (“Sun International”), a public company listed on the Johannesburg Stock Exchange (JSE).
Sun International is not controlled by any firm or shareholder. Sun International and its subsidiaries will collectively be referred to as the “Acquiring Group”.
The Acquiring Group is active in the provision of:
(i) casino gambling;
(ii) alternative gaming (i.e., noncasino gambling), including limited payout machines (LPMs) and online betting offered under its SunBet brand in South Africa and various other jurisdictions; and
(iii) short-term accommodation.
The Acquiring Group owns 11 casino complexes in various locations across South Africa.
In Gauteng, the Acquiring Group operates the Time Square and Carnival City casinos.
The primary target firm, Peermont, is jointly controlled by GoldenTree Asset Management Lux S.àr.l. (“GoldenTree”) and MIC Leisure Proprietary Limited (“MIC Leisure”).
Peermont controls several firms in South Africa. Peermont and all the firms directly and indirectly controlled by Peermont shall collectively be referred to as the “Target Group”.
The Target Group is active in (i) casino gambling; (ii) online betting under its PalaceBet brand; and (iii) short-term accommodation.
Peermont does not hold direct or indirect interests in any entities operating as LPM route operators. Peermont operates a total of eight casinos. In Gauteng, it operates the Emperors Palace casino.
