The $396.6 million (R70 billion) deal, announced in December last year, would include Peermont’s Emperors Palace resort and its online betting brand, PalaceBet. Photo: Reuters
South Africa's Competition Commission on Sunday gave the red light to Sun International’s proposed acquisition of Peermont Holdings, recommending that the Competition Tribunal prohibit the merger due to its potential effects on market competition.
The $396.6 million (R70 billion) deal, announced in December last year, would include Peermont’s Emperors Palace resort and its online betting brand, PalaceBet. Sun International’s share price closed at R44.67 on Friday, up 0.86% on the JSE.
The Competition Commission said the merger would significantly impact the casino gambling landscape in South Africa, reducing the number of national casino operators from three to two and creating a highly concentrated market where two companies would control 92% of casinos in the country.
“The proposed merger is likely to substantially prevent and/or lessen competition in the provision of casino services in South Africa and in central Gauteng,” it said. “This transaction would reduce the competitive landscape and increase market concentration, giving only two firms dominant control.”
“In central Gauteng, the merger will reduce the number of casino operators from three to two, effectively removing Emperors Palace as a competitor to SISA’s Time Square and Carnival City, as well as Tsogo Sun’s Montecasino,” the Commission noted. This reduction, it warned, may result in weakened competition, potentially allowing Sun International to “retain a greater proportion of bets staked by gamblers.”
Further concerns were raised regarding reduced consumer choice, with the Commission cautioning that the remaining casino operators might “reduce the level of winnings and promotions, knowing there would be no competitive response.” This environment could encourage cooperative behaviour rather than competition.
Although Sun International and Peermont proposed certain remedies to address these issues, the Commission found them inadequate. “Having considered the remedies tendered by the merging parties, the Commission is of the view that the remedies do not adequately restore competition,” it said.
The Tribunal is set to make the final decision on the matter.
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