Goldman Sachs emerged on Monday night as the head of a consortium for a leveraged buy-out of Gold Reef, a South African casinos and theme park owner and operator, following frantic negotiations over the weekend.
The deal represents the first significant leveraged buy-out of a company since turmoil in the credit markets hit private equity deals financed by risky high-yield bonds. The board of Gold Reef last night recommended the offer, which values the business at about R11.4bn ($1.6bn).
Among Gold Reef’s operations are the Gold Reef City casino and theme park south of Johannesburg and the Goldfields Casino in Welkom, south-west of Johannesburg. The Krok family, which made money out of skin-whitening cosmetics under apartheid, are shareholders.
Gambling has been an important element of South Africa’s leisure sector since it became legal in the mid-1990s. The deal was put together at break-neck speed to meet a Monday night deadline to secure commitments from shareholders over more than three-quarters of the company’s shares, people close to the situation said.
Ethos Private Equity Fund last month announced it was part of a consortium including black economic empowerment shareholders and Gold Reef management offering R34 a share for the company. It is understood Goldman Sachs Capital Partners and Goldman Sachs’ real estate funds were involved in the consortium from the outset. But market turmoil put the deal in doubt until close to the deadline.
The offer represents a 48.5 per cent premium to Gold Reef’s share price before the company announced an approach on March 8.
The deal is the second-largest private equity deal in South Africa. Ethos’ R5.4bn fund is the largest private equity capital pool raised for African investment. It has sealed deals with Moresport, a sports retailer, and Dunlop, the tyre and sports equipment manufacturer.
Goldman and Nedbank are providing the debt. Goldman advised the consortium, while Merrill Lynch was sole adviser to Gold Reef. Gold Reef shares closed up 1.1 per cent at R31.75.