Sky City looking for other takeover options

Evan Davies says Sky City will continue to look for acquisitions as part of its plans to get bigger. Picture / Brett Phibbs

Sky City's failed attempt to buy Australia's Taverner Hotel Group has not deterred it from looking to expand through acquisitions, says managing director Evan Davies.

He said yesterday any asset with a gaming focus would be a good fit within Sky City's existing portfolio.

New Zealand's largest casino company bid "significantly less" than the $380 million that winning bidder Woolworths was prepared to pay.

Taverner's 33 hotels and 2000 poker machines make it Australia's second-largest pub company. Woolworths already owns the biggest, Australian Leisure & Hospitality, which it bought last year for A$1.3 billion ($1.4 billion).

Davies said Sky City's strategy had been consistent: to generate value from present properties and keep an eye out for new opportunities, but he did not go as far as to describe it as acquisitive.

"We've said we would keep our eyes open for opportunities ... to the respect we feel we can add value. I wouldn't describe that as acquisitive."

News that Sky City would not buy Taverner met mixed reviews from analysts yesterday, with Goldman Sachs JBWere analyst Marcus Curley downgrading his long-term rating on Sky City shares from "hold" to "sell".

He said Sky City's desire to expand through acquisitions raised concerns because of "Sky City's patchy acquisition track record" and the fact this strategy would make it a less attractive consolidation partner or as a takeover target.

But Anthony Aboud, of UBS, raised his rating on the stock from "neutral" to "buy", basing this on Sky City's "high-quality assets", high entry barriers in the casino industry and the fact the negative impact of the New Zealand smoking ban was largely behind the company.

Sky City shares rose 6c to $4.62 yesterday.