By SIMON HENDERY
SkyCity has its sights on attracting more high-rolling Asian gamblers to its soon-to-be-acquired Darwin casino.
The Auckland-based company yesterday signed an agreement to buy Darwin's only casino from Las Vegas-based MGM Mirage for A$195 million ($220 million).
The sale and purchase agreement is conditional on the deal receiving the required
approval from the Northern Territory Government and Australia's Foreign Investment Review Board, a process which is expected to take at least two to three months.
The acquisition of what will become SkyCity's fifth casino will be fully funded by debt through a syndicate of existing SkyCity bank lenders.
The group has embarked on a major upgrade of its other Australian site - SkyCity Adelaide - but managing director Evan Davies said a similar capital expenditure was not necessary in the Darwin casino, which had undergone an A$18 million upgrade.
"It is already an efficiently operated business that is performing well and, should settlement be finalised as we anticipate it will be, we would envisage spending some time assessing what improvements might be made in the short term."
Davies said the purchase allowed SkyCity to consolidate its position in the Australian market. It will increase the company's Australian revenue from 17 per cent to 29 per cent of total group revenue.
"The price is comfortably within our range, the operations meet our criteria and also present opportunities for future business development," he said. "The capability we have shown in translating our New Zealand-based experience into an Australian context, through [SkyCity Adelaide] assures us that a second operation within Australia will be positive for the company."
The MGM Grand Darwin - to be renamed SkyCity Darwin - is the largest casino in the Northern Territory with three gaming rooms, 26 tables and 450 pokie machines.
It includes a 107-room hotel with Darwin's only five-star facilities, four restaurants and five bars.
The casino's annual revenue has risen from A$65 million to A$74 million since 2000 although earnings before interest, tax depreciation and amortisation (ebitda) have remained flat over that time at between A$26 million and A$27 million.
SkyCity said it was paying a "favourable" ebitda multiple of 7.3, considerably less than the 8.9 multiple it paid for Adelaide.
The share price was unchanged yesterday at $4.60.
Asked about the potential to increase its business out of Asia, Davies said SkyCity was already active in the Asian market, both as a hotel and conference centre operator, and in promoting itself to those coming to New Zealand and Australia specifically to gamble.
Its Auckland, Hamilton, Queenstown and Adelaide casinos all have invitation-only VIP gambling areas.
Expanding SkyCity's VIP gambler marketing efforts would be helped by the Darwin casino's relative closeness to Asia and its five-star facilities.
Asked about expansion in New Zealand, Davies said: "If shareholdings in the Christchurch casino were available for sale at a price that we thought was appropriate then we would certainly be interested."
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