KEY POINTS:
Senior market sources are tipping a private equity buyer is the mystery bidder for SkyCity rather than a trade buyer in the casino sector.
One of the most likely suspects, Australian casino operator Tabcorp - which owns the Jupiter Casinos - said yesterday it had not made any approach, noting that SkyCity had no permanent chief executive and was still in the midst of major restructuring.
SkyCity shares soared by nearly 30 per cent in trading yesterday as the company told the market it had "an indicative and confidential approach from a party expressing an interest in acquiring 100 per cent of the shares ... the party indicates a potential cash offer price range which would represent a significant premium to SkyCity's current share price".
But SkyCity later played down the seriousness of the offer saying it was far from a certainty and not yet at a stage where it had been considered by the board, and would not have been announced but for a technicality of market rules.
But the way the announcement was released to the market infuriated some brokers and fund managers.
The company revealed the approach - not with a separate announcement to the NZX - but tucked inside an arcane statement on the distribution of profits.
SkyCity Entertainment was making no apologies.
Company secretary Alistair Ryan stood by the handling of the announcement saying that takeover interest was at a stage where the company would not normally be expected to make a disclosure.
The Companies Act and NZX listing rules meant if something was confidential - or at an early stage - companies did not have an obligation for disclosure "until such time as it is regarded as probable rather than in the maybe-maybe category.
"Under normal circumstances [the approach] would not be far enough advanced for us to contemplate disclosure because the board has not considered it.
"It is an approach and not more significant than that. If companies reported everything that came to hand the market would be cluttered with announcements that came to nothing.
"We found ourselves with a profit distribution that issues shares in lieu of dividends.
"We said if you don't wish to retain we will buy them back and a formula that came to $4.36 per share.
"Shareholders would be getting a notice if we felt that it was important to alert them there was something happening in the 'might be' category."
Ryan agreed that the company could have added another line above the statement saying there was a potential takeover.
But investors were not impressed by the explanation.
"It all sounds a bit naive when you see the outcome, which has been that the company has gone up in value in this way," said a shareholder who asked to not be named.
SkyCity opened at $4.33 per share and reached a peak of $5.56 before closing at $5.28 - up 95c on the day. Around 3.6 per cent of shares in SkyCity changed hands.
The notice increased the capital valuation of SkyCity by almost $429.8 million to $2.388 billion.
Banking sources said that any potential buyer would be unimpressed that the disclosure had moved the share price up so much after just a tentative offer. It would now create greater expectations of a premium once an offer became more serious.
"It's an unusual way to announce a takeover," said Simon Botherway of Brook Asset Management, which holds around eight million shares in the company.
Rickey Ward of substantial shareholder Tyndall Investments, was also unimpressed.
"Given the share price today you would have to say that the disclosure was material and the manner it was handled was not what you would expect from a company like SkyCity on the New Zealand stock exchange."
Macquarie New Zealand investment director Arthur Lim said SkyCity's approach was "odd".
"The speculation has been out there for such a long time and the company has said so often that it is a potential target.
"To finally have someone approach them with this headline-grabbing announcement and have it hidden away seemed very odd."
He said that the company share price had been low and it was not unusual for companies to be takeover targets.
But he said SkyCity's situation could be similar to that faced by Restaurant Brands, which had had interest from private equity that, ultimately, was not a serious buyer.
"The question is whether they are just tyre-kickers, or not," he said.
SkyCity's biggest shareholding individual - the founder and controversial former managing director Evan Davies, who left the company in June - would have ended the day nearly $5 million better off.
That figure is based on his shareholding at September 14 after picking up share options the previous week from his old role with the company, and assumes he did not sell shares beforehand.
