JOHANNESBURG – Hospitality Property Fund (HPF), a subsidiary of gaming and leisure group Tsogo Sun, saw its share price surge 6.50 percent on Friday after Tsogo announced it plans to separately list its hotel business by June.
HPF owns 53 properties valued at R8.1 billion as of March 2017.
Tsogo Sun said following its acquisition of a controlling interest in HPF, its hotel division has reached critical mass and that there are limited opportunities to leverage synergies within the group due to gaming and hotel divisions operating in distinctly different markets and servicing different customers.
The move will see Tsogo’s hotel interests housed under one holding company, being Tsogo Sun Hotels (THL), while Tsogo Sun will comprise only of the gaming division, being casino and alternative gaming operations.
The company said that the separation of the group into two focused entities would provide shareholders with greater investment choice and the ability to manage their exposure to gaming and hotel operations.
“It is also envisaged that the separate listing of THL will provide shareholders with transparent disclosure relating to the operations of the hotel division and allow for the valuation of THL without discounting for gaming-related regulatory risks,” the group said.
“Tsogo Sun and THL will enter into a shared services agreement which will govern the continued availability of essential services currently provided by the group and the allocation of costs relating to shared service departments in order to ensure that the separation of the gaming and hotel divisions does not result in the duplication of central cost structures.”
Tsogo added that its 59.2 percent stake in HPF will remain owned and consolidated by THL.
Marcel von Aulock, previously a chief executive of the group, would lead the new hotel business, while Laurelle McDonald will be appointed as chief financial officer of THL.
John Copelyn, the chief executive of Hosken Consolidated Investments, Tsogo’s biggest shareholder, will be chairperson of the THL Board.
The group in November ditched its proposed disposal of seven mixed-use casino properties to HPF, and the subsequent distribution of the group’s entire holding of Hospitality shares to Tsogo shareholders after some investors did not support the transaction.
Asief Mohamed, the chief investment officer of Aeon Asset Management, said the primary reason for the unbundling is an attempt to create value for shareholders after splitting the hotels and gambling interests.
“A number of investors both locally and globally do not want to invest in gaming and related stocks. This will enable these investors to invest in hotel related entity,” Mohamed said.
Tsogo shares closed Friday’s trading session 2.49 percent stronger at R21.01, valuing the group at just more than R24 billion.