KEY POINTS:
SkyCity directors will be hoping for a private equity buyout proposal after its deadline for offers closes on Tuesday.
If not, SkyCity chairman Rod McGeoch and the board will be implementing the company's plans under a new chief executive and amid persistent investor ill-feeling over past handling of management.
The board approach before Evan Davies' departure caused an uproar among small investors at SkyCity's annual meeting on October 26. Some investors are still sceptical.
"The jury is still out on the SkyCity board," said Rickey Ward, joint domestic equities manager for Tyndall Investments with a stake in the company.
"People don't forgive and forget easily in this [investment] industry," he said.
"SkyCity has a way to go to build a bridge with investors."
SkyCity opened its doors to potential buyers at the end of September.
At the start of this week only one party - believed to be United States-based private equity TPG Newbridge Capital - had completed due diligence of the company accounts.
A second private equity firm - believed to be US-based Providence Equity Partners - is thought to have expressed an interest.
Announcing proposed new directors for the board this week, McGeoch said that if no offer was forthcoming the board would be enthusiastically implement plans to revitalise SkyCity under a yet-to-be appointed CEO.
But the board seems haunted by the past.
At the annual meeting on October 26 McGeoch dismissed shareholder criticism about board oversight of management when Davies was CEO while married to former marketing manager Heather Shotter.
On October 14, McGeoch told a newspaper that Davies had been devastated by his marriage break-up, and left powerless to reverse the fortunes at the company.
"This was a guy still deeply in love with his wife and with some very young children. I've never seen a person hurt more," he said.
He told the AGM it would have been unfair to ask Shotter, who had been the longer employee, to leave after she married Davies, he said.
"So we took another way and decided to change the governance. We crafted our own set of rules around that relationship. Everybody understood that it was not ideal but we made the judgment to be fair."
But Macquarie Equities New Zealand Investment director Arthur Lim said the board approach had concerned some investors.
"Some of the feedback I have from investors [is they] were outraged at the board attitude - having the chief executive and his wife working together, and then latterly that they had given Davies time to get over his marital issues," he said.
"The level of oversight was not what you would have expected from a billion-dollar company," he said.
On Thursday shares in SkyCity dropped 16c to close at $5.18, prompting one US-based hedge fund to question volatility so close to a sale deadline. Shares closed unchanged yesterday.
Lim said the looming deadline for offers had focused investors' minds.
He said the approach of opening the company up to offers invited "tyre kicker" parties that were happy to have a look at the company accounts but had little interest in actually buying.
SkyCity would have been judicious in ensuring other casino companies could not do that by setting a deadline.
But he said the market perceived this as indicating frustration and that there was little developed interest.
"When directors set a deadline it suggests things are not moving."
That could be seen with other takeovers which had stalled or come to nothing - Auckland International Airport, Restaurant Brands and The Warehouse. "There are issues for SkyCity such as the acceptance that gaming tax in this country was low.
"On one stroke of the pen a government could increase gaming tax and have an impact on the company - that is where the real danger is," Lim said.
In a note issued on November 14 Goldman Sachs JB Were indicated that were a takeover to proceed it would succeed at $5.90 a share.
If not, it would fall to $4.80 based on the failed merger of Contact Energy, the Goldman Sachs note said.
On the cards
* Tuesday: Deadline for buyers
* December 5: Scheduled board meeting
* Early 2008: Shareholder vote on any offer
