Donaco International Ltd has signed an exclusive term sheet to acquire “a significant gaming and hospitality business in Cambodia”, the company said. It did not provide further details on the acquisition target.
The Australia-listed firm “is currently conducting due diligence” investigations, it said in a filing on Monday.
Donaco already operates a casino hotel in Vietnam’s northern province of Lao Cai, bordering China’s Yunnan province. Joey Lim Keong Yew, Donaco’s chief executive, in August said the company had a “strong pipeline of potential deals in place”.
In its latest results report, the firm said it was focused on the Southeast Asia market, but that it did not rule out investing in other regions.
“The business proposed to be acquired is well-established and profitable, with good growth prospects,” Monday’s filing by Donaco stated.
It added: “Parts of the signed term sheet are binding, including an exclusive negotiation period extending into early 2015. This will enable the company to complete its due diligence investigations, and to finalise and sign long-form agreements.”
Donaco said it would fund the deal via existing cash reserves and new debt facilities, together with an equity component for the vendor. The final acquisition price has not yet been set.
It added that the acquisition target would serve a “distinct” market from its existing “China-facing business” in Vietnam, thus providing “diversification as well as scale benefits”.
Cambodia’s gaming scene is dominated by NagaWorld, operated by Hong Kong-listed NagaCorp Ltd. The development is the country’s largest casino complex and the only in capital Phnom Pehn. It is currently undergoing an expansion – Naga2 will include more than 1,000 new hotel rooms and luxury suites, up to 300 gaming tables and 500 electronic gaming machines.
But the country has proven to be a challenging landscape for smaller operators.
Last month, Australia-listed Cell Aquaculture Ltd pulled out of a deal to gain control of the Roxy Casino, in Bavet, a Cambodian town with approximately 10 casinos on the border with Vietnam. The company said the termination of the agreement occurred due to difficulties in hiring skilled management personnel.
In September, Israeli casino developer Queenco Leisure International Ltd expressed “substantial doubts” about the ability of its Queenco Casino and Hotel to continue in business. The property is located in Sihanoukville, a coastal area in southwest Cambodia.
Cambodia is currently mulling allowing casinos within its borders to open their doors to local players.
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”Assuming that our [Tigre de Cristal] phase two project and the other future operators’ development plans remain on track, we may see the benefits of a ‘cluster’ effect [in the Primorye Integrated Entertainment Zone] as early as 2021”
Summit Ascent, lead developer of Tigre de Cristal