Gateway Casinos Income Fund gets friendly Australian takeover bid

Investors in Gateway Casinos Income Fund hit the jackpot Wednesday as units of the trust rose almost 25 per cent following a $1.37-billion takeover bid.

Two Australian firms, media and entertainment company Publishing and Broadcasting Ltd. and investment firm Macquarie Bank, are offering $25.26 per unit in cash for Gateway. The offer reaches $1.37 billion when the assumption of debt and the purchase of operating companies Gateway Casinos Inc. and Fortune Gaming Management are included.

In the wake of the friendly offer, Gateway units finished with a gain of $4.97at $25.00 on the TSX.

The management of Gateway encouraged unitholders to accept the Australian bid.

"Put simply, we believe this offer represents exceptional value for investors," said Gateway CEO Dave Gadhia during a conference call.

Based in Burnaby, B.C., Gateway has three casinos around Vancouver, four in the Okanagan region and two in Edmonton.

Two-thirds of the unitholders of Gateway must vote in favour of the deal, which also requires the approval of gaming regulators in B.C. and Alberta.

Gateway investors owning 31 per cent of the fund have already agreed to the takeover bid.

Toronto merchantbank Clairvest Group Inc. will sell its 5.7 per cent stake in the trust and 28.4 per cent of Gateway Casinos Inc.

Gateway is the latest Canadian income trust to attract a takeover offer most from foreign buyers. On Monday, KCP Income Fund agreed to an $804-million takeover offer from a New York-based private equity firm. KCP's CEO said Ottawa'sdecision to tax income trusts led to the sale, and he predicted many more would follow.

More thana dozen income trust takeovers have been announced since Finance Minister Jim Flaherty announced a tax on income trust distributions last Oct. 31.