Sky City hedges bets with cyber gambling

By KARYN SCHERER

Auckland casino operator Sky City is placing an each-way bet on the future of gambling, with a possible $50 million investment in an online sports betting company.

It has taken an initial 7 per cent stake in Canberra's Canbet, with the possibility of lifting its stake to 33 per cent following due diligence.

The investment will cost Sky City an initial $A5 million ($6.38 million), increasing to $A39 million if it likes what it sees.

It is believed to have been encouraged by entrepreneur Eric Watson, after its first foray into Australia with the purchase of the Adelaide Casino this year.

Mr Watson's private investment company, Cullen Investments, has 30 per cent of Canbet.

It acquired the stake after Canbet bought into a Melbourne lottery business, TMS Global Services, in which it held shares.

A significant proportion of Canbet's business is overseas customers betting on United States sporting events and Mr Watson said yesterday he believed the company had huge potential to expand internationally.

The deal follows a decision by the Australian Government to slap a 12-month ban on any new internet gambling services, quashing Sky City's plans to apply for an internet casino licence either late this year or early next year.

Retrospective legislation banning any new internet-based services from May is expected to be introduced to the Australian Parliament in the next few months.

In February, Sky City said that it wanted to set up an internet-based business in Australia, following warnings from the Department of Internal Affairs that it would be illegal in New Zealand.

Yesterday, managing director Evan Davies said Sky City was not necessarily giving up hope of establishing an internet-based business.

"This is a wagering business rather than a gaming business, so we see this as a complementary opportunity in a field that is within our spectrum of expertise, but there are a whole variety of other ways through which we could approach the gaming opportunity."

Canbet is one of a dozen internet-based sports betting services licensed by the Australian Government.

It has not yet announced its results for the June year, but has forecast a bottom-line loss of $A12.7 million on revenue of $A3.6 million.

It predicts a loss of $A520,000 by next June on revenue of $A9.9 million.

The company is trying to reinvent itself after a backdoor listing on the Australian Stock Exchange.

Last November, it was bought for $A10.9 million by E.tec, which later changed its name to Canbet.

It predicts that turnover will increase from $A38 million to $A225 million over the next year.

Sky City will acquire its initial stake in Canbet at 30Ac a share - an 18 per cent premium on its previous closing price.

It will also be granted an equal number of options which can be exercised at 20Ac at any time before March 2002.

Canbet recently scheduled a general meeting to approve the issue of up to 50 million ordinary shares and another 50 million free options "to parties to be determined by the directors."

Yesterday, analysts said that they were comfortable with Sky's investment.

Jeremy Simpson, of ABN Amro, said: "It's only a $5 million outlay initially before they commit any further money, so it not like they're just throwing in $50 million from day one."