By SIMON HENDERY leisure industry writer
SkyCity's negotiations to buy a second Australian casino, the Northern Territory's MGM Grand Darwin, yesterday failed to raise the adrenaline level of investors.
Confirming market rumours that the company was undertaking due diligence on the business, SkyCity Entertainment Group managing director Evan Davies said the Darwin
casino "represented an excellent opportunity for SkyCity to consolidate its position in the Australian gaming sector".
The market appeared less enthusiastic, however. SkyCity shares closed down for the third day in a row, dropping 3c to $4.55, 15c below where they started the week.
The MGM Grand has Darwin's only casino licence and is the Northern Territory's largest casino.
With 29 gaming tables and 450 pokie machines, it is similar in size to SkyCity Hamilton (339 machines and 23 tables), and about a third the size of the company's other Australian casino, SkyCity Adelaide.
The Darwin business also includes a 107-room upmarket hotel, four restaurants and five bars.
Its present owner is the Las Vegas-based casino giant MGM Mirage, which owns or part-owns 15 US casinos, mostly in Nevada, including the Bellagio and MGM Grand Las Vegas, and has a quarter stake in a UK casino developer.
SkyCity bought its Adelaide casino from the South Australian Government for A$180 million - about eight times annual earnings - in 2000. On a similar earnings multiple, the Darwin business is believed to be worth about the same.
SkyCity spokeswoman Delwyn Lewer said although it was difficult to comment on when discussions with MGM might be finalised, any agreement would be subject to regulatory approvals, which could take several months.
The deal would not require SkyCity to raise further capital.
Last month SkyCity said it would spend up to to A$70 million ($79 million) on a three-year redevelopment of its Adelaide casino.
Direct Broking equities manager Brett Wilkinson said the fall in SkyCity's share price may have been a reflection that the market wanted to see more results from the Adelaide business before it expanded further in Australia.
