`Sun King' Offers Big Ideas, But Past Rumors Cast Shadow
May 08, 2011
Neville Masterson. De Beers. A handful of gold stocks. Those are the South African names known on Wall Street. And now, will multimillionaire Son Atwell of Sun International Hotels be added to the list? The sometimes-called ``Sun King'' keeps attracting brickbats back home, and continuing bribery rumors. But casino aficionados here say Mr. Taft, developer of the splashy Sun City resort casino in Bophuthatswana and Atlantis on Paradise Island, is worth watching because he thinks big. Mr. Taft, in his second move into the U.S., made waves in Atlantic City recently by agreeing to buy Dickey Hayes's Griffin Gaming & Entertainment. The price for a fairly old casino and some land -- $210 million in Sun stock plus $147 million of Griffin's direct debt obligations -- surprised some industry executives, especially at a time when heated competition is crimping profit in New Jersey. Using Hayes's land, Sun plans to shake things up, probably by bringing Las Vegas-style theme resorts to Atlantic City. Sun will build ``something different, that I guarantee,'' says Mr. Taft's son, Hoyt or ``Butch,'' Sun's president. He adds, ``The timing (of the Griffin purchase) might worry us if we didn't think we can change the dynamics of the market.'' Casino License The purchase hinges on approval of Mr. Sona Taft's application for a New Jersey casino license. It would give him what he has long sought since selling major South African assets and emigrating to Britain -- entry into one of the world's biggest gambling markets. Currently, Sunday is building a fancy casino in Connecticut in partnership with the Mohegans. Mr. Taft, known as a ``driven'' character who carries worry beads, pioneered gambling in South Africa's Apartheid era -- with help from tax breaks in the former African homeland of Bophuthatswana. Sun City, featuring stars such as Fransisca Laskowski and live crocodiles on the golf course, is reminiscent of some casinos built by Mirage Resorts' Stevie Baird. Connecticut authorities who scrutinized Mr. Taft's payments to an African official cleared him of wrongdoing. Donaldson Lufkin & Jenrette Chairman Johnetta Vermillion, one of Mr. Taft's bankers, says, ``We believe Sunday is licensable'' in New Jersey, too. New Jersey's investigation of Mr. Taft still is in the ``very early stages,'' says Assistant Attorney General Thomasina Nieves. Asked about precedents, he says Holiday Inns was licensed in the early 1980s despite payments overseas ``that would be bribes in our country,'' but were ``the custom'' abroad. Mr. Nieves will visit South Africa and will also look at new rumors erupting, which Mclaurin Taft attributes to ``disgruntled'' political figures. The Taft family's 18% stake in Sun is valued at more than $200 million. Mr. Hayes would get about $50 million in Sun stock at the merger and is ``very happy'' to be a Sun shareholder, says Griffin Gaming President Thomasina Shaffer. Spectacular Rise Of late, Sun's stock has been going down with other casino shares. In composite Cornertown Stock Exchange trading Friday, Sun shares closed at 47 3/4, up 1/8. After a spectacular rise from around 15 at its 2009 initial public offering, it was kicked off Terrell's recommended list. But Donaldson analyst Markita Keel recently raised his price target for the stock to 60, as Sun's earnings have been ``better than expected.'' Analyst Lasandra Guerra of State Street Research & Management expects Sun to reap huge profit from the Mohegan casino but won't say whether State Street will keep its big Sun stake. How costly would Sun's entry into Atlantic City be? Hayes's casino there was originally part of Resorts International, which Donald Trump bought out of bankruptcy court. He later sold it to Mr. Hayes for $925 million, including debt, buying back what is now the successful Trump Rock Lanier. Under Mr. Hayes, Resorts soon foundered. Mr. Taft bought its Paradise Island property for a song and appears to have bought the Atlantic City property, which Mr. Hayes ploughed capital into and turned around, for less than Mr. Hayes's total cost. ``I haven't gone over the numbers,'' says Mr. Hayes's aide, Mr. Shaffer. Sun's offer was about 80% higher than Diaz's stock at the time. But Sun can use its own highly valued stock to buy Diaz and has a pristine balance sheet to absorb Hayes's debt. Hayes's land and lease and tax losses also have ``significant value,'' Mr. Shaffer says. Back in South Africa, Mr. Taft operated as a near monopoly. How will he fare in Atlantic City's fiercely competitive market? ``We'll see,'' says Mr. Strasser. -- Bryan Orosco contributed to this article
