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October 22 - Two directors of Gold Reef Resorts could have ended up much worse than they did, following a potentially bad deal which they became involved in. The financial deal which they were part of could have resulted in them having to foreclose, but at the last minute they managed to offload their 15,07% stake to a competing and rival casino group, Tsogo Sun.
The details of the potential disastrous deal are as follows: In 2007, Bongani Biyela and Richard Moloko, both directors in Gold Reef Resorts, bought a stake in the casino group for R20,50 per share. The finances for the transaction were secured with an unidentified institution and resulted in the deal going through.
Gold Reef, however, did not do very well in the past year in the financial markets and on the JSE and most of the year they were trading for well below the R20,50 price for which the directors purchased their shares. As a result, financiers began to be concerned that Biyela and Moloko would be unable to meet their commitments. Only a year after they purchased their stake in the casino group, the two directors faced foreclosure.
However, some clever strategic planning, or pure desperation, got the two thinking and they approached Tsogo Sun, which is a long-term rival of Gold Reef Resorts, and which has always had its eye on getting part of the stakes. Tsogo Sun was very positive about the potential deal and agreed to purchase R940,5m worth of shares, through a wholly owned subsidiary Mainstreet 581.
The group strategic planning director of Tsogo Sun, Marcel von Aulock said that they were pleased with the agreed price and considered Gold Reef a solid investment.
Meanwhile, Biyela and Moloko are laughing all the way to the bank with their R82.1 million profit on their investment.
Read our Gold Reef city casino review.
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