Sky City slumps after US investor sells up

Sky City shares dropped nearly 4 per cent on opening this morning after US investment company The Capital Group offloaded its 5.5 per cent stake in the casino operator overnight.

Sky City shares were 21c lower at $5.29 shortly after the market opened today after The Capital Group sold its 22.97 million shares at $5.20 each to a range of New Zealand and Australian institutions and some retail investors. The sale was handled by JB Were.

First NZ Capital broker James Snell said the sale was likely a move to take advantage of a recent rally in Sky City's share price.

Sky City shares have climbed the best part of a dollar in value in a little over two months.

Amro Craigs Equities' Matt Willis said the fact the stake had gone to a range of investors would likely douse any takeover speculation surrounding Sky City, which has interests in five of New Zealand's six casinos and owns two others in Australia.

Possible Sky City suitors include Australia's largest gaming group, Tabcorp Holdings Ltd, and Kerry Packer's Publishing and Broadcasting Ltd (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."

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

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

- NZPA