Odyssey branches out

Odyssey Gaming, the poker machine maintenance company with the stated aim to "challenge the dominance of Unitab", has formally announced it will make an offer to purchase the assets of collapsed property group LKM Capital, after LKM's receivers convened a meeting of debenture holders to consider a letter from Odyssey received in March.

Brian Silvia and Andrew Cummins from Ferrier Green Krejci Silvia were appointed as receivers and managers of the Coffs Harbour-based LKM last year after it was brought down by defaulting loans. LKM was part of a local financial planning company Koops Martin Group, which shares a director with Odyssey in Rolf Koops.

The decision by Odyssey – led by former Aristocrat Leisure chairman Gary Garton – to get involved represents not just a detour however, but something of a return to its past life as a diversified investment group. Under different management, Odyssey used to be the Citadel Pooled Development Fund. Citadel bought Odyssey in a reverse takeover in 2006.

The Odyssey/LKM deal may be seen by some as effectively another back-listing, considering that Odyssey has a market cap of around $850,000 and LKM has $63.5 million of outstanding debentures, in addition to some 70 per cent of Odyssey's issued capital. But the play for LKM – which holds no gaming assets besides Odyssey shares – isn't the end of Odyssey's poker machine adventures.

Odyssey is currently preparing an expression of interest to tender for the Victorian government's single gaming machine monitoring licence, which covers approximately 27,500 fruit machines across the state. If Odyssey wins the tender it will represent a huge shake-up to Tatts Group's and Tabcorp's dominance of the industry.

In April last year the Victorian government announced that Tatts and Tabcorp would lose their duopoly after 2012 and that hotels and clubs would be able to bid directly for 10-year gaming machine entitlements. Since then the state has not only received submissions from Tabcorp, Tatts (via Maxgaming Holdings, formerly known as Unitab) and Odyssey, but from a range of other parties including eBet, GTech Corporation, Intralot Australia and Bally Technologies.

Apart from the ASX-listed eBet, the other contenders are all major players. It is thought that some of them, including Tatts, Tabcorp, Intralot and Lottomacia (which owns GTech) are also hoping to get a slice of New South Wales' proposed lotteries privatisation (Gambling on an outcome, April 9).

Should LKM's receiver and trustee, Sandhurst Nominees, agree to the offer, the group will be restructured around an expected $10-15 million valuation of LKM's net assets, Odyssey said. No final offer price has yet been announced and an independent expert report is yet to be written. Odyssey said it could not disclose further details of the offer, including advisors.

Elsewhere in the sector, Crown has completed its purchase of a $US320 million preferred instrument in Cannery Casino Resorts.

The instrument, which is convertible to 24.5 per cent of Cannery's outstanding equity subject to regulatory approval, was purchased after a full takeover bid was scrapped. If Crown does not obtain approval it will be forced to pay a $US200 million break fee and a booby prize of 4.1 per cent of Cannery for $US40 million.

Crown scrapped a full takeover bid last month after James Packer's sister Gretel allegedly got cold feet over requirements to disclose her personal affairs to the Pennsylvanian gaming authorities (Crown's bid canned, March 13).

Earlier this month Crown denied speculation that it was planning to invest in MGM's $US8.7 billion Las Vegas CitiCenter development. The development of CityCenter, once described as "the sort of project God would build if he had the money" has been placed in jeopardy following a legal spat between MGM and co-developer Dubai World.

In relation to Cannery, Crown was advised by a Macquarie Capital team led by Rob Ure. Specialist advisor Global Leisure Partners acted as co-advisor, with New York firm Skadden Arps acting on the legals.