Argyle Street Management’s special purpose vehicle will acquire all remaining shares in the casino operator.
Australia.- Donaco International has announced that On Nut Road Limited (ONR), a special purpose vehicle run by Hong Kong-based Argyle Street Management, will acquire all remaining shares in the company. On Nut Road, which has been an investor in Donaco since 2019 and currently holds 12.84 per cent of issued capital, will pay AU$0.045 (US$0.028) cash per share, valuing Donaco at around AU$55.59m.
The board unanimously recommended that shareholders vote in favour of the scheme at a meeting on June 3. It said Donaco’s largest shareholders, Lee Bug Huy and Lee Bug Tong, who collectively hold (directly or indirectly) 42.17 per cent of Donaco’s issued capital, have indicated that they will vote in favour. The deal will also need court approval. It could be finalised by June 18.
Donaco’s non-executive chairman, Porntat Amatavivadhana, said: “We have carefully considered the merits of the scheme, and we believe On Nut Road Limited’s offer provides compelling value to Donaco shareholders, representing a 54.10 per cent premium to the 90-day volume weighted average share price. 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.
“While Donaco has performed steadily in the last few years and has emerged from the pandemic, the company’s financial headwinds 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. 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.
“Moreover, the new gaming legislation in Thailand to introduce casino franchises in Bangkok 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. Considering the prevailing border issues and uncertain electricity supply, this may present a unique opportunity for Donaco shareholders that may not arise again. Given these factors, it is imperative for Donaco shareholders to look closely at the offer.
“Therefore, the board believes that the scheme provides shareholders with a compelling opportunity to de-risk their investment and realise certain value at an attractive premium to historical trading levels leading into this announcement.”
For the first half of the financial year, Donaco reported net revenue of AU$21.83m (US$13.6m), up 12 per cent in year-on-year terms, while earnings before interest, taxation, depreciation and amortisation (EBITDA) reached AU$11.39m (US$7.10m), up 17.0 per cent. According to the company, the rise highlights steady growth following stringent financial management and increased traffic from tourism.
