Harrah’s Unit to challenge Gold Reef’s South African casino plan

Harrah’s Entertainment’s Emerald Casino Resort, which owns a casino on the Vaal River south of Johannesburg, will “aggressively” challenge Gold Reef Resorts Ltd.’s plans to build a casino in the same area.

“We know that they have been trying to get a license for a number of years,” Emerald’s CEO Martin Rice said in an interview from his mobile phone today. Emerald has previously opposed an application by Gold Reef, he said, and will “aggressively oppose any application for a license or attempt to build a casino.”

Gambling has boomed since the first democratic elections in 1994 after an apartheid-era ban on the practice was lifted and more members of the black majority got jobs and adopted middle- class lifestyles. Annual gambling revenue has nearly doubled to USD 1.6 billion over the past five years, according to statistics compiled by the National Gambling Board. There were 36 casinos operating in the fourth quarter of 2008.

That’s led to the expansion of companies such as Gold Reef and Sun International Ltd. Gold Reef “has very advanced plans” to build a casino on the Vaal, CEO Steven Joffe said in an interview from Johannesburg today, adding that construction is due to begin this year.

Gold Reef expected that Emerald “may want to challenge” the new casino, Joffe said. Buying Emerald may be easier than building a new casino, he said, declining to say whether a bid for the company will be made.

Gold Reef and Emerald abandoned talks about a takeover about three years ago, Rice said, declining to be more specific about the negotiations. Closely held Emerald is 70 % owned by Reno, Nevada-based Harrah’s. Harrah’s also owns Caesars Palace and the Flamingo in Las Vegas. Gold Reef may make further acquisitions, Joffe said.

The company expects “unbelievable” opportunities to present themselves as South Africa’s economy contracts for the first time in a decade, causing some companies to struggle, Joffe said. Africa’s largest economy shrank at an annualized rate of 1.8 percent in the fourth quarter of last year. Possible acquisitions lie in “big hotel groups that don’t have any casinos,” he said.

Gold Reef wants to operate in “most African countries,” including Angola and Botswana, Joffe said. Many African nations prefer that operators combine hotels and casinos rather than only operate gambling houses so Gold Reef needs “to work on our hotel development” expertise, he said.

The company today reported net income that more than doubled to USD 36 million in the year ended December 31, from USD 14.7 million a year earlier, according to a statement to Johannesburg’s stock exchange earlier today. Sales rose 29 % to USD 221.8 million.

Gold Reef currently operates Gold Reef City Casino and Silverstar Casino in South Africa’s Gauteng province and Mykonos Casino in the Western Cape, according to its Web Site.