Donaco International Ltd, an operator of border casinos in Cambodia and Vietnam, has announced that it has entered into a binding agreement with one of its investors – a Hong Kong-based investment fund – for the latter to acquire 100 percent of Donaco’s shares.
Donaco stated in a filing to the Australian Securities Exchange on Monday morning that it had “entered into a binding scheme implementation deed with On Nut Road Ltd” for the latter’s “proposed acquisition of 100 percent of the shares in Donaco that it does not already own, via a scheme of arrangement for AUD0.045 [US$0.028] cash per Donaco share.”
The proposed price represents a 50.0 percent premium compared to the closing price of AUD0.030 per Donaco share on Friday.
On Nut Road “is a special purpose vehicle managed by Argyle Street Management Ltd, a Hong Kong licensed fund manager with more than US$2 billion of assets under management,” Donaco said in its filing.
It added that On Nut Road had been an investor in Donaco since 2019, currently holding 12.84 percent of Donaco’s issued capital.
The scheme consideration implies a total valuation of Donaco’s equity on a fully diluted basis at approximately AUD55.59 million, according to the filing.
The Donaco board “unanimously recommends that shareholders vote in favour of the scheme,” the filing stated.
For the deal to proceed, it must be approved by Donaco’s shareholders in a meeting proposed for June 3. It must also receive court approval. If there are no setbacks, the deal could be implemented by June 18, according to a tentative timeline provided by Donaco.
The company added: that Donaco’s largest shareholders, Lee Bug Huy and Lee Bug Tong, who collectively hold a 42.17 percent interest in Donaco’s issued capital, have indicated that they will vote in favour of the scheme.
Donaco recorded net revenue of AUD21.8 million for the July to December 2024 period, marking a 12.2 percent increase from a year earlier. Group-wide earnings before interest, taxation, depreciation, and amortisation (EBITDA) stood at nearly AUD11.4 million in the reporting period, up 17.0 percent year-on-year.
At the group’s main operation, the DNA Star Vegas resort in Poipet, on Cambodia’s border with Thailand, property EBITDA rose by 5.7 percent year-on-year to AUD8.1 million. Donaco also operates the Aristo International Hotel (pictured) in Lao Cai, Vietnam, near the country’s border with China.
Donaco’s Monday filing included comments from the firm’s non-executive chairman, Porntat Amatavivadhana, who stated that On Nut Road’s offer “provides compelling value to Donaco shareholders, representing a 54.10 percent premium to the 90-day volume weighted average share price.”
He added: “The board believes that the scheme is in the best interest of shareholders, providing certainty in the form of a cash payment to shareholders while removing the risks associated with the cyclical nature of our business.”
Mr Amatavivadhana noted that, while Donaco had “performed steadily in the last few years,” the company’s financial challenges “have been compounded over the years due to limited profit margins and a lack of substantial investor confidence.”
“This has made fundraising efforts for any form of growth particularly challenging,” he added. “The dependence on a single, major shareholder for financial stability becomes even more critical in light of the economic strains brought about by the pandemic.”
Donaco’s non-executive chairman also referred to moves to legalise casino gambling in Thailand, saying that such developments “could significantly impact the flow of patrons to Donaco’s border casinos.”
“In addition, the impact on costs due to recent actions to cut power along certain towns between Thailand and Cambodia, resulting in intermittent power supply, further complicates our operational conditions,” he stated.
“Considering the prevailing border issues and uncertain electricity supply, this may present a unique opportunity for Donaco shareholders that may not arise again,” Mr Amatavivadhana said, referring to On Nut Road’s acquisition proposal.
