New Zealand casino operator considers acquisition

Tuesday, Sept. 20, 2005 | 9:44 a.m.

Sky City Entertainment Group Ltd., New Zealand's largest casino operator, is considering an acquisition as it tries to diversify earnings, most of which come from its Auckland casino center. Sky City's shares dropped.

"Sky City is undertaking due diligence in relation to a possible acquisition," the Auckland-based company said in a 142-page prospectus for the sale of A$150 million ($115 million) of debt securities released on Sept. 16. Sky City declined to comment further, said spokesman Paul Gregory.

Chief Executive Evan Davies is trying to combat a profit drop in Auckland, where the company gets more than 70 percent of earnings, by expanding other New Zealand casinos and buying Australia assets. Sky City's Adelaide casino, bought in 2000, had a 44 percent drop in earnings last year and some investors said they're concerned at the prospect of more acquisitions.

"They have had something of a checkered history in acquisitions," said Anthony Halls, who helps manage the equivalent of $140 million in New Zealand equities at BT Funds Management (NZ) Ltd. in Auckland and holds Sky City stock.