Bahamians holding Kerzner International's BDRs stand to make a profit "north of 60 percent" according to an analyst commenting on Monday's announcement that Kerzner International had agreed to be sold for over $3 billion.
"The market closed well above the $76 and that could mean that the price could well be higher than the $76 that is being offered," the analyst said. The offer is an eight percent increase over Friday's close. Once the news of the buyout became public, however, the market responded positively and the share jumped $9.07 or 13 percent to close at $79.43, $3:43 above the offering.
In a statement released in The Bahamas, Sol Kerzner stated that the "timing was right for us to take the company private," adding that their confidence in the company was demonstrated by the' fact that they were increasing their stake in the company to "approximately 25 percent".
Butch Kerzner son and CEO of Kerzner International said that several of their partners in the buyout were "already partners on existing projects with Kerzner International". He also stated that the partners can provide the company with "significant support and access to additional capital for future development".
And talking of the future Butch Kerzner reassured the Bahamian people and government that "The Bahamas is an essential part of our growth plan". The release also noted that all projects for The Bahamas would be going ahead as planned, "including Atlantis Phase III on Paradise Island, Condo Hotel, Dolphin Experience and Athol Island Golf Course.
Nor will there be any payroll changes. "It will be business as usual" for both management and employees whose positions will remain unaffected by the sale.
Asked to comment on why now another financial analyst referred to an earlier announcement during the second half of 2005 when Kerzner International stated that it would be buying back its shares. At that time he had said that it was an indication that the "Kerzners believe the market is undervaluing their share and that they can gain more by buying back their shares".
Yesterday the analyst stated that it is a "clear indication that Kerzner believes that the present value of the share price does not reflect future earnings and he is prepared to buy back the shares."
He said once Kerzner had looked at his brand, the future plans, which Bloomberg reported could possibly include a casino in Singapore, plus with the cash he had, why not; he certainly could do better buying back the company than investing that money in present projects or leaving the stock out there in the market.
Bloomberg quoting a casino-industry analyst, reported that the "immense global consolidation" in the industry "night have been on their [Kerzners] minds". Bloomberg quoted the analyst Eugene Christiansen of Christiansen Capital Advisors as saying "everyone is a target. No one is safe."
The financial analyst said discounted the argument that they were taking the company private to avoid regulatory oversight, an argument made by other market experts, but the financial analyst noted that
the company _had successfully survived in the regulatory regimes.
"I think it is all about valuation," he said, adding that the move allows him to consolidate his options. "It is always easier talking to fewer partners than hundreds of shareholders," he said.
He also said that the move made it easier for the company to put together options including an exit strategy from The Bahamas.
The observation was made in the wider context of what added competition from Baha Mar on Cable Beach and the Ritz Carlton on Rose Island would have ﾠon profit margins.
As recently as 12 months ago the Kerzners observed that the market may not be large enough to support two Atlantis-styled properties when Baha Mar first ﾠannounced its plans for redeveloping Cable Beach.
A special committee of the board was set up to "negotiate the price and other terms of the transaction", BToomberg.com quoted Butch Kerzner as saying. The committee includes two "significant shareholders" that are not affiliated with the investor group of Sol Kerzner, Butch Kerzner, Istithmar, Whitehall Street Global Real Estate Limited Partnership 2005, Colony Capital LLC, Providence. Equity Partners Inc. and The Related Companies LP. According to the Bloomberg story, the company stated that it will be seeking better offers during the next 45 days.
The special committee of ther board that negotiated the purchase on behalf of the company will supervise that effort, Bloomberg reported. The Kerzners and Istithmar have "agreed to cooperate in the process".
By C. E. HUGGINS Business Editor
