Johannesburg - Tsogo Sun’s plans to acquire Sun International’s 10 percent stakes in SunWest International and Worcester Casino in the Western Cape have inched closer to reality after the Sun International Employee Share Trust approved the transactions ahead of Saturday’s deadline.
Sun International and its black economic empowerment partner, Grand Parade Investments, are each selling 10 percent interests at SunWest and Worcester to Tsogo Sun. The transactions will give Tsogo Sun an effective 20 percent interest in SunWest and Worcester.
Read: Sun moves along with stake sale
Sun International said yesterday that its sale of a 10 percent stake to Tsogo Sun had become unconditional after the Sun International Employee Share Trust approved the deal. But Grand Parade Investment’s disposal of its assets is still subject to approval of shareholders by June 30. Grand Parade Investment can extend the deadline by another 30 days.
Deadline
Sun International said if Grand Parade Investments shareholders did not approve the deal, Sun International would increase the stake sold to Tsogo Sun in its own transaction by another 10 percent so Tsogo Sun would get the aggregate 20 percent interest in SunWest and Worcester.
The acquisitions will enhance Tsogo Sun’s presence in the Western Cape.
SunWest’s flagship assets are GrandWest Casino and Entertainment and the Table Bay Hotel. On the other hand, Worcester operates the casino, hotel, leisure and entertainment business of Golden Valley Casino at Worcester.
In terms of the agreement, Tsogo Sun will be a passive investor with no board representation on SunWest or Worcester. In addition to that, Tsogo will have no operational involvement in the two companies. Sun International would continue to manage SunWest and Worcester.
Tsogo Sun and Sun International have previously attempted to change ownership of entertainment assets in the Western Cape. The Competition Commission last year blocked Tsogo Sun’s bid for Sun International’s assets. In the face of the competition hurdle, the two companies eventually abandoned the plan.
De Wet Schutte, an analyst at Avior Capital, said yesterday that the deal was not a compromise. “The new deal… is structured to achieve a number of specific imperatives for all parties involved.”
He said there could be a number of reasons why Sun International had decided to reduce its interest in the Western Cape assets. “From a Sun International perspective, one can argue that they are diversifying their casino exposure in South Africa and arguably removing relocation risk in the Western Cape.”
The Tsogo Sun share price was yesterday down 0.34 percent to close at R26.24.
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