Berjaya Corp Bhd (BCorp) (3395), a gaming, property and hospitality group, will buy a 70 per cent stake in a private sports betting company owned by its chairman Tan Sri Vincent Tan (picture) for RM525 million.
BCorp told Bursa Malaysia yesterday that it plans to purchase a controlling stake in Ascot Sports Sdn Bhd, which has been re-issued a conditional sports betting licence by the Finance Ministry.
Ascot Sports is presently 70 per cent owned by Tan, while the balance is owned by his son Datuk Robin Tan.
Tan has also agreed to guarantee that the company will make a cumulative net profit of at least RM375 million for the first three years of operations.
To back this profit guarantee, he has offered to deposit RM81.25 million worth of listed securities and BCorp will withhold RM125 million cash from the total purchase price.
Therefore, BCorp's initial consideration will be RM400 million.
BCorp will finance the purchase by undertaking a renounceable rights issue of up to RM614.46 million nominal value of 10-year eight per cent irredeemable convertible unsecured loan stocks (Iculs).
It will be done on the basis of one RM1 nominal value of Iculs for every eight BCorp shares owned.
"A portion of the funds raised will be used to pay the initial consideration of RM400 million with the remaining to be deployed for working capital of the group," BCorp said in a statement yesterday.
It added that Tan has undertaken to subscribe to his and his private companies' entitlements in full, which would amount to at least RM400 million.
He will not net in any cash as he will reinvest the entire initial consideration to be received to honour his rights issue obligations.
Ascot Sports, which is currently a dormant company but set to be the next big money spinner for BCorp, recorded net liabilities and net loss of RM11.2 million and RM4.6 million respectively for the financial year ended December 31 2008.
BCorp said the value accorded to Ascot Sports based on 100 per cent interest is RM750 million. Therefore, its cash consideration represents a price-to-earnings multiple of six times based on the average net profit per year of RM125 million.
"Comparing examples in Singapore and Hong Kong where legalised sports betting has been in operation for a number of years, the market is seeing consistent double- digit compound growth rates," BCorp said.
It added that Hong Kong Jockey club had revenues of about HK$35 billion (about RM15 billion) while Singapore Pools revenue is estimated at a few billion Singapore dollars.
BCorp said the high barriers to entry and low competitive pressure will provide a highly stable business environment for Ascot Sports to sustain and grow its business. It also has the first-mover advantage in setting up licensed sports betting operations in Malaysia.
Source:
By Jeeva Arulampalam, Business Times
No comments:
Post a Comment