Thursday, July 3, 2014

ACCC questions Aquis takeover of Reef Casino

The ACCC has released a statement of issues on the Aquis takeover of Reef Casino and invited comments from interested parties: ACCC calls for comment on the Aquis proposed acquisition of Reef Hotel Casino

The components of the statement most relevant to key issues:


28. The ACCC’s preliminary view is that without the proposed acquisition the Reef Casino would be likely to continue to operate either under its current ownership or under the ownership of another non-Aquis operator. However the ACCC received submissions during the course of market inquiries suggesting that Cairns could not sustain two commercially viable casinos. As a result of this material, the ACCC is considering the likely impact of the Aquis Resort on the Reef Casino’s ongoing viability.

The ACCC invites comments from market participants on its preliminary view regarding the operation and viability of the Reef Casino if the proposed acquisition does not proceed. In commenting on these issues, market participants may wish to consider:

1) The Reef Casino’s current financial circumstances

2) The types of customers that visit the Reef Casino, or that would visit the Reef Casino in the future, and whether those customers would instead be likely to visit the Aquis Resort once it opened

3) The population of Cairns, the expected number of tourists that would travel to Cairns in the future if the Aquis Resort were developed, and how many of those tourists would be likely to visit the Reef Casino.

29. Before the Aquis Resort can be developed, it needs to obtain various regulatory approvals, including:

a. A casino licence from the Queensland Government as part of its bid process

b. Various probity and other regulatory approvals relating to the resort from the Queensland Office of Liquor and Gaming Regulation

c. Environmental approvals from state and federal governments

d. Local planning approvals.


30. The ACCC notes there is a degree of uncertainty inherent in the Aquis Resort proposal. The Aquis Resort would be of a scale that is unprecedented in Australia, and the viability of an ambitious project of this scale may be less certain than a smaller project would be. There is also some uncertainty as to whether wealthy Chinese patrons will visit the Aquis Resort in such numbers as Aquis hopes.


31. Aquis has told the ACCC that the Aquis Resort will not be developed in the absence of the proposed acquisition, because:

a. Aquis needs to obtain finance for its resort - the first phase of the first stage of the Aquis Resort is estimated to cost approximately $4 billion to construct. Aquis has told the ACCC that it is unlikely to be able to raise sufficient funds from debt and/or capital markets to construct the Aquis Resort in the absence of the proposed acquisition.

b. Aquis needs to use the existing Reef Casino as a platform from which to develop its profile with its intended customers (predominantly international VIPs), and train its workforce, while the Aquis Resort is being constructed.


 

32. The ACCC’s preliminary view, based on the information presently available, is that the Aquis Resort is likely to be developed (in the sense of being a realistic commercial proposition) with or without the proposed acquisition. In reaching this view, the ACCC has taken into account factors including that:

a. Aquis is investing significant funds in the proposed development and clearly intends to build it, subject to regulatory approvals being received on commercial terms.

b. Aquis holds an option to acquire the land on which it plans to build the resort.

c. As discussed above at paragraph 10, the Queensland Government has included the Aquis resort in a shortlist of two developments for the award of up to two casino licences as part of the Queensland Government bid process.
d. Aquis has commenced the process of seeking regulatory approvals – it has released an Environmental Impact Statement for public consultation.8


33. The ACCC understands that the proposed acquisition may provide Aquis with certain advantages in developing the Aquis Resort. However, the ACCC’s preliminary view is that the proposed acquisition is not necessarily essential to Aquis obtaining finance for the development of the resort, or the successful promotion and opening of the resort.

The ACCC invites comments from market participants on its preliminary view regarding the likelihood of the Aquis Resort being developed. In particular, market participants may wish to comment on:

1) The likelihood of the Aquis Resort receiving a casino licence as a result of the Queensland Government bid process, and the conditions on which any licence may be issued

2) Any commercial, legislative, economic, regulatory, demographic or other impediments to the Aquis Resort being developed

3) Whether and how the proposed acquisition might affect the likelihood of the Aquis Resort being developed, including but not limited to:

a) Whether Aquis would be able to secure finance (through debt and/or capital markets) to develop the Aquis Resort if it did not acquire the Reef Casino

b) Whether the Aquis Resort is likely to be commercially successful if it is not able to make use of the Reef Casino to help develop an international profile and experienced workforce while the Aquis Resort is being constructed.



If anything the ACCC have also provided there more information than has been released so far on the risks, viability and financing of Aquis? Reef Casino Trust is ex distribution this week and trading down on small volume today.

1 comment: