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Goldman Sachs JBWere has downgraded casino operator and takeover target SkyCity Entertainment Group to hold from buy on uncertainty over whether a bid would succeed.
Analyst Marcus Curley said the most likely bidder for SkyCity was a private equity player at up to $5.75 a share, but that bid had only a 40 per cent chance of success based on market valuations of SkyCity.
"A more positive recommendation requires either greater confidence of success in a private equity bid or full execution of SkyCity's restructuring programme," Curley said.
An unnamed bidder is undertaking due diligence in SkyCity, with an indication of whether a bid will follow expected by the end of the month.
Shares in SkyCity closed yesterday at $5.27, after hitting a record high of $5.56 on September 21 after news of the mystery bidder's approach was released to the market.
Curley said SkyCity's restructuring programme could value the stock at up to $6.22 a share, well above what private equity could be prepared to pay. If no bid eventuates, he expected the share price to retreat to $4.80.
- Reuters
