Sky City dives as investor quits

About $120 million was wiped from Sky City's market value after the casino group's second largest shareholder, US investment fund Capital Group, sold its 5.5 per cent stake.

The $119.4 million sale late on Tuesday night to New Zealand and international investors at $5.20 a share came a day after Sky City's shares hit a record high of $5.50.

The shares, up $3 since the start of 2002 after accounting for two-for-one share split, closed yesterday down 28c at $5.22.

ABN Amro Craigs Equities' Matt Willis said Capital's sale would probably douse talk of a bid for Sky City, which has interests in five of New Zealand's six casinos and owns two in Australia.

Possible Sky City suitors had included Australia's largest gaming group, Tabcorp Holdings, and Kerry Packer's Publishing & Broadcasting (PBL).

"If PBL or Tabcorp had serious intentions to move on Sky City, that [Capital Group's stake] would have been a good start for them and that hasn't happened."

Willis said the receding prospects of a Sky City takeover in the short term would take a bit of strength out of the company's share price, as would the fact that the placement was at "quite a generous discount".

A spokesman for the organising broker, Goldman Sachs JB Were, said demand for the shares was strong.

"The book was well supported and $5.20 was a solid price for buyer and seller," he said. "On its face, it's a nice discount to what the stock was trading but, the reality is, the stock stands up on its own merits. It's got a nice yield. It's clearly a good business to be in."

Sky City spokeswoman Delwyn Lewer said the sale had been widely supported by a broad range of New Zealand, Australian and other international institutions, and about 30 bidders had been allocated shares.

She said it was not unusual for the price to be discounted at that level, when such a large parcel of shares was being traded.

Sky City has forecast a $116 million to $119 million bottom-line profit for this financial year, despite the impact of the new smoking ban.