SABMiller’s plan to sell its 39.6 percent stake in Tsogo Sun was part of its strategic review, which resolved that gaming and hotels were not core to its operations, the second-largest global brewer said yesterday.
The stake, worth R11.7 billion, would be sold through a combination of a secondary placing to institutional investors and a repurchase by Tsogo Sun, SABMiller said.
The deal would comprise a fully marketed secondary placing of 305 million ordinary shares held by the brewer to selected institutional investors.
The number of placing shares and the price thereof would be determined following a book-building process.
The other component would include a proposed repurchase by Tsogo Sun of a minimum of 130.2 million ordinary shares from the brewer for R2.8bn.
This would be settled by a combination of existing cash reserves and debt facilities, Tsogo Sun said yesterday.
SABMiller chief executive Alan Clark said the hotel and casino operator had performed well over the years.
“However, gaming and hotels are not core to our operations and we have concluded that the time is right for us to exit our investment through a transaction which is beneficial to the shareholders of both companies,” he said.
Clark added that the proceeds of the transaction would be reinvested in SABMiller’s core growth businesses, including its African operations.
Tsogo Sun said the transaction was a unique and attractive opportunity to repurchase and cancel a significant number of ordinary shares on terms that would benefit the firm’s earnings a share and its empowerment shareholding.
Tsogo Sun chief executive Marcel von Aulock said: “The exit of SABMiller marks the end of a long-standing relationship between the two companies. We have committed to support SABMiller through this process to ensure the orderly exit of a material shareholder.”
Since the repurchase would result in Tsogo Sun acquiring more than 5 percent of its own share capital, shareholder approval was required, it said.
The hotel group said it had never had a trading agreement with the brewer allowing it to buy beverages at a discounted rate, so “the transaction will not change how Tsogo Sun purchases SABMiller’s products. The companies have a long standing relationship when it comes trading and work well together in that regard”.
Hosken Consolidated Investments (HCI), which holds 41.5 percent of Tsogo Sun through subsidiary Tsogo Investment Holding, said it would vote in favour of all the resolutions related to the deal to be proposed at the general meeting in August.
Last month, HCI indicated that it was not seeking to buy SABMiller’s stake. Buying shares would be “a very, very big decision for us and it is certainly not something we could fund out of the current borrowing capacity of the company”, the holding company said.
Tsogo Sun said the transaction had come at a time when it had concluded most of its planned acquisitions and it would now focus on casino expansions that would not be affected by this deal.
The R560 million expansion and redevelopment of the Silverstar Casino was nearly complete and a R630m refurbishment and expansion of the Gold Reef casino and theme park was under way.
The company was now waiting for final approval on the R1.8bn expansion of Suncoast Casino in Durban, it said.
Tsogo Sun lost 3.16 percent to close at R26.05 on the JSE yesterday, while SABMiller shed 0.74 percent to R621.55. - Business Report