Recently the Competition Commission, South Africa’s competition watchdog group, announced that the gaming and hotel giant, Tsogo Sun, would not be allowed to acquire stakes in units that are owned by Sun International as part of an acquisition deal announced in May 2014. The Commission ruled that such an acquisition could lessen, or even prevent, competition in South Africa’s gaming and hotel market, due to the potential coordination of the merging companies.
However, Tsogo Sun Holdings has declared its intention to challenge the Competition Commission’s decision, and will take the case to the Competition Tribunal.
Tsogo Sun Holdings is one of three companies listed on the Johannesburg Stock Exchange (JSE) which said that they would oppose the recommendation made by the Competition Commission. The other two are Sun International and Grande Parade Investment.
“The parties do not agree with the recommendation by the Competition Commission and intend to oppose such recommendation before the Tribunal,” the three said in a join statement recently..
Tsogo Sun Holdings is hopeful that the Tribunal will rule in its favor, as, although it takes recommendations from the watchdog Competition Commission, a number of major decisions have been overturned in the past in other cases.
In early 2014, Tsogo Sun Holdings announced that it would be purchasing stakes held by Sun International in Worcester Casino and SunWest International. Tsogo said that it would spend R2.1 billion in this acquisition deal.
At the time it was noted that the deal would be subject to approval from the Competition Tribunal.
The market did not react well to the news that the deal has meanwhile being blocked by the Competition Commission. Tsogo Sun Holdings saw its shares fall over 4.5%. Sun International’s shares dipped slightly at 0.6%.
The South African government carries a policy which is largely against acquisitions in any industry that could create a dominant player. The reasoning is that big players (in this case, the fear being that Tsogo Sun will become one) could push smaller businesses out of the market. This is not good for a healthy market, which needs smaller players to create competition and improve the industry.
Tsogo Sun Holdings has over 45 years’ experience in the South African gambling market, and around Africa. The group boasts over 90 hotels in its portfolio, with 14 casino developments – including some of the most popular entertainment destinations in South Africa.