SkyCity enters binding agreement to sell a long-term Concession for its Auckland Car Parks

SKC

On 4 April 2019, the gaming entertainment player, SkyCity Entertainment Group Limited (ASX: SKC), announced that it has entered into a binding agreement  to sell a long-term concession over its Auckland car parks to Macquarie Principal Finance Group for an amount worth $220 million.

Macquarie was appointed by Care Park to operate car park that was required to perform parking operation as per the agreed service standards. After the fulfilment of certain conditions, the settlement is expected to be completed by 31st July 2019.

Key transaction terms:

Term Comment
Price An amount worth $220 million (cash free, debt free) will be payable in lump-sum at settlement
Concession With the completion of the transaction, Macquarie Principal Finance Group will hold the license to operate SkyCity Auckland’s main car park having 3,200 spaces till 30 June 2048.

Further, the car park land along with the buildings and responsibility for plant/building services will be owned by SkyCity.

Operator Care Park.
Conditions to settlement There will be a requirement of consent from various regulatory bodies. It also required other approvals to effect the sale of concession. The settlement also required IRD binding ruling on tax treatment for both SkyCity as well as Macquarie. The conditions to settlement also included that there should not be any insolvency event occurring along with no loss of SkyCity Auckland gaming license.
Car Park operations The car park services will remain available for public use, which included casual as well as license holders. Availability regime is established to make sure the ongoing priority access for SkyCity customers and staff. As per the agreed service standards, the operators will be required to perform the parking operations.
Existing car park license The existing license holders from SkyCity will transfer arrangements with to Macquarie/Care Park.
Step-in right SkyCity can step into car operations in case of serious health and safety reasons, force majeure, operator default and/or to discharge statutory duties.

The pricing for the SkyCity VIP/loyalty customers and staff will be fixed. However, it will grow at a rate of 2.5% p.a. Out of the total car parks, 450 car parks will be reserved exclusively by VIP customers. Also, SkyCity will be able to book up to 900 car parks for the game promotions, four times in a month. During the peak period, there will be a mandatory closure of the car parks in order to prioritize the access the for SkyCity VIP/loyalty customers and staff.

The operator service standard included that the operator will be operating the car park with care, skill as well as diligence in a proper, safe and efficient manner. The operator will make sure that there is minimal disruption in case of broader business activities of SkyCity. It needs to implement a health and safety plan that remain consistent with the existing standards of SkyCity. It also requires complying with the requirements of SkyCity with respect to security, surveillance, and host responsibility.

Further, SkyCity holds the right to terminate the concession agreement in certain circumstances, where there is a breach of availability regime, operator in general persistent breach of service requirements or in such cases where there is a damage to the reputation of SkyCity.

On the other hand, Macquarie can also terminate the concession agreement in case of insolvency of SkyCity or in case of breach by SkyCity of key concession provisions. In case of termination, SkyCity will be paying Macquarie a compensation sum equivalent to the fair value of the concession. However, termination in case of Macquarie default, the compensation sum will be less than 20%.

On 29 March 2019, the company announced the sale of the SKYCITY Darwin business to Delaware North and on 4 April 2019, the company confirmed the completion of the sale of its SkyCity Darwin business to Delaware North. The SkyCity Darwin Casino is renamed as Mindil Beach Casino & Resort. Further, the company informed the exchange that David Christian, the General Manager of SKYCITY Darwin would take up the role of GM Adelaide Casino from 08 April 2019. Luke Walker the GM of Adelaide Casino will leave SKYCITY effective from 4 April 2019.

The shares are trading at A$3.695 (As at Friday 05 April 2019, 01:30 PM), down by 1.467% as compared to its previous closing price. The company has a market capitalization of $2.56 billion and approximately 682.45 million outstanding shares.


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