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Cambodia – Casino operations changing hands

By - 14 November 2014

Australia-based Donaco International has signed an exclusive term sheet, and is currently conducting due diligence, for a proposed material acquisition of a significant gaming and hospitality business in Cambodia. The market is distinct from the company’s existing China-facing business at the Aristo International Hotel and so the proposed acquisition provides diversification as well as scale benefits.

Donaco already operates a casino hotel in Vietnam’s northern province of Lao Cai, bordering China’s Yunnan province. Joey Lim Keong Yew, Donaco’s chief executive, in August said the company had a “strong pipeline of potential deals in place”.
Parts of the signed term sheet are binding, including an exclusive negotiation period extending into early 2015. This will enable the Donaco to complete its due diligence investigations, and to finalise and sign long-form agreements.

The acquisition will take place at a multiple of six times earnings before interest, tax, depreciation, and amortisation (6x EBITDA) for the financial year of the business ending on 31 December 2014.

The acquisition will be funded from the company’s existing cash reserves, and new debt facilities, together with an equity component for the vendor. Based on the range of financing scenarios reviewed by the Board, the proposed acquisition is expected to provide strong earnings per share accretion for the Company’s shareholders.

Further details will be provided to the market when the long form agreements are finalised.

Last month, Australia-listed Cell Aquaculture pulled out of a deal to gain control of the Roxy Casino, in Bavet, a Cambodian town with approximately 10 casinos on the border with Vietnam. The company said the termination of the agreement occurred due to difficulties in hiring skilled management personnel.

In September, Israeli casino developer Queenco Leisure International Ltd expressed “substantial doubts” about the ability of its Queenco Casino and Hotel to continue in business. The property is located in Sihanoukville, a coastal area in southwest Cambodia.

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