Reef Casino Trust (ASX: RCT) shares have soared by 44% in mid-morning trading, after the company received a takeover offer from Hong Kong billionaire Tony Fung.
Mr Fung's Aquis Casino Acquisitions has made a bid of $4.354 for each unit in the property trust, valuing the company at more than $200 million. Shares in Reef Casino last closed at $2.84, but are currently trading at around $4.00 – still a decent discount to the offer price.
Reef Casino Trust owns the property and casino in Cairns, but the operator of the Reef Hotel Casino is Reef Corporate Services, a joint venture between Accor Casino Investments and Casinos Austria International. Aquis is also planning to takeover Casinos Austria and Reef Corporate Services, to become the sole owner and operator of the casino.
Casinos Austria and Accor, who collectively hold around 70% of the units in Reef Casino Trust, have indicated they will support the bid if it proceeds. Aquis needs approval from the Queensland and Australian Capital Territory (ACT) governments as well as various regulatory authorities.
Mr Fung is planning a $4.2 billion floating casino and resort called Aquis in Cairns, and the cash-strapped Queensland government is apparently rolling out the red carpet, with its eyes on more than $1 billion in gambling royalties. The Queensland state government has discussed allowing more casinos to be built in the state, potentially challenging Echo Entertainment's (ASX: EGP) incumbent resorts in Townsville, Brisbane and the Gold Coast.
More casinos could boost tourism numbers, which have been hurt by the high Australian dollar and economic weakness, bringing even more revenues into the state. SkyCity Entertainment (ASX: SKC) is believed to be one of the bidders for a cruise ship terminal and casino complex on the Gold Coast, while Crown (ASX: CWN) is believed to be interested in developing a new casino in Brisbane.
Foolish takeaway
Given state government support for new casino developments as well majority shareholders in Reef Casino Trust backing the deal, it seems highly likely that the takeover will proceed. What is unknown is whether another player like Crown or Echo will step in and make a higher bid.
