Pandemic puts casino deal at risk of collapse

Catalyst Capital Group Inc.’s latest attempt to cash in its chips in Burnaby-based Gateway Casinos and Entertainment Ltd. looks like it might be a long shot.

The Toronto-based private equity firm that owns Gateway had agreed in December to sell the 27-property gaming operation to New York City’s Leisure Acquisition Corp. for $1.5 billion.

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The transaction was set to close on April 5, but the closing date was pushed back to June 30.

Last week, Leisure Acquisition’s shareholders voted to again extend the deadline for closing the deal to buy Gateway — this time until Dec. 1.

Gateway’s holdings in Metro Vancouver include the Grand Villa Casino in Burnaby, the Starlight Casino in New Westminster and the Cascades Casino Resort in Langley.

“The company believes that it is unlikely that there will be sufficient time before June 30, 2020, to complete an initial business combination,” Leisure Acquisition said in a June 23 corporate filing.

It added doubt about whether the transaction would ever close.

“Either the company or Gateway has the ability to terminate the merger agreement to the extent the business combination has not been completed by July 15, 2020,” Leisure Acquisition said in its filing.

“There can be no assurance that it will be possible to complete a business combination with Gateway prior to July 15, 2020.”

With the COVID-19 pandemic ravaging many service-sector businesses’ balance sheets, plenty of mergers and acquisitions that were agreed to before March have either been scrapped or are uncertain to close.

Victoria’s Secret owner L Brands in February agreed to sell a 55 per cent stake to Sycamore Partners for $525 million US, but then accepted Sycamore’s bid to scuttle the transaction.

Cineworld Group plc similarly terminated its $2.8-billion takeover of Cineplex Inc.

Rumours have swirled that Air Canada has been lobbying federal officials to block its plans to buy Air Transat for $700 million, although Canada’s national carrier has denied the reports.

Lawson Lundell partner Mandeep Dhaliwal said: “A lot of companies that had agreed to transactions, if they think that things have materially changed and would not be as beneficial, they would be scrutinizing the text of contracts to see if there is anything for material adverse change or force majeure [unforeseeable circumstances that could prevent a company from fulfilling a contract]. Certainly, there’s been a lot of conversations about this in the past few months.”

Dhaliwal, whose practice deals mainly with banks and private lenders in secured and unsecured financing transactions, said while deal flow is down from 2019, corporate transactions are being completed.

 

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