What price for SkyCity?

So, now SkyCity Entertainment Group is officially on the block.

Not only will potential buyer, US private equity group TPG Newbridge, be allowed to do due diligence, but the directors will actually be out seeking offers for the casino operator - which is a little unusual.

Normally you might expect directors to be a little more coy than that and to sit back and wait for more offers. After all, I can't imagine there are any potential buyers of SkyCity that DON'T know it has been approached already.

Of course, shareholders will want to know that the best price possible is being placed on the table. So the directors very much have a responsibility in that regard. But it would be interesting to know what TPG Newbridge's attitude would be to being told that, yes, it can do due diligence, but the board is going to be out and about trying to flog the company off to other people in the meantime.

I've been critical before of the SkyCity board and my views haven't changed. No proper succession planning was in place at the company, so when managing director Evan Davies was jettisoned just before the end of the June financial year there was an inevitable vacuum.

The decision to have Mr Davies leave before a fulltime replacement was lined up was wrong. It left SkyCity sitting as an obvious takeover target.

Now the best the board can do, it seems, is wring every last cent out of any would-be bidders.

The question, given the state of upheaval the company is in, is how much would be a good price?

SkyCity has a lot of institutional shareholders. They are unlikely to want to part with their stock for less than $6. But given the general dissatisfaction a number of these shareholders appear to have with SkyCity, then somewhere not far north of $6 might do the trick.

In the longer term, I would say the company is definitely worth more than that, but I think short term considerations - and disgruntlement with the company - might cloud the picture. Whether the board's search for competing bidders will throw up many contenders is another key question. It seems unlikely.

My guess is that if TPG Newbridge is prepared to see the process through, it may well succeed. It could be that in future years investors will be left to ponder on how such an apparently sure-fire thing as a gambling company managed to lose its way to the extent it was gobbled up at what will prove to be a cheap price.

- © Fairfax NZ News