Speculation is mounting over the future of SkyCity Entertainment’s Adelaide casino and hotel, with sources suggesting that it has hired an investment bank for a potential sale.
The casino operator has previously denied a sale of the Adelaide entertainment asset is on the block, but sources say that investment bank UBS is quietly working behind the scenes on options for the complex, which includes finding a buyer.
The $2bn SkyCity is New Zealand’s largest tourism, leisure and entertainment company and has casinos in Auckland, where it generates most of its earnings, Hamilton and Queenstown, as well as Adelaide.
Listed in Australia and NZ, it is one of the three casino operators in Australasia and reports its full-year results on August 25.
SkyCity Adelaide consists of a casino and hotel that some estimate could be worth about $500m.
The company has spent about $330m on the Adelaide development that began in 2018. It transformed the asset into a world-class integrated entertainment destination with 12 food and beverage outlets, and integrated a new hotel building with the existing refurbished heritage building.
The development was opened to the public at the end of December 2020.
The casino generated $10.2m of normalised earnings before interest, tax, depreciation and amortistaion for the six months to December amid Covid-19 lockdowns.
Some sources believe that Blackstone could be a buyer of the Adelaide casino through recently acquired Australian casino operator Crown Resorts. The Australian-listed Star Entertainment, which has previously been mooted as a merger candidate for SkyCity, is unlikely to be a buyer.
Star Entertainment has too much on its plate, say sources, after being subjected to an inquiry over its fitness to continue holding licences at its casinos.
This followed revelations of money laundering, fraud and illegal junkets at the gaming giant’s Sydney operations.
SkyCity, too, is the subject of an independent review after AUSTRAC identified potential money laundering at its Adelaide casino.
Any sale is likely to occur at the review outcome.
SkyCity sold its Darwin casino in 2018 to Delaware North for $188m, and would likely use the proceeds from a sale to concentrate on its core operations in NZ.
SkyCity’s property, plant and equipment was valued at $1.4bn at December but the company has ruled out selling the real estate.
Most of the valuation relates to its casino, hotel and entertainment complex in Auckland.
Yet the company has weighed options for the property assets, including holding the real estate in a separate structure which would highlight its value and potentially add support to its share price.
SkyCity told the market in June that it expected to deliver between $135m and $140m of normalised earnings before interest, tax, depreciation and amortisation, and net profit of between $3.5m and $7m.
Shares in SkyCity closed down 2c at $2.61.
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