Chilean Investor IPS Makes Offer for 50.1% of South African Sun International….Rejected by Sun

Main Photo: The Sun City Resort

Date: June 2020

Locations: South Africa and South America

Name: Sun International – Sun City Resort and others

No. of Keys: TBA

Seller: The Sun International brand has a large legacy in the gaming, hospitality and entertainment sector, in South Africa. It operates or has an interest in 19 resorts, luxury hotels and casinos.

Their entry into Latin America began in Chile in 2008. Their Latin American profile (Monticello Grand Casino in Chile and the Ocean Club Casino in Panama) has now been merged with the casino and hotel profile of Chile-based, Dreams SA, making it the largest gaming company in Latin America with operations in Chile, Peru, Colombia and Panama.

They are best known for The Palace of The Lost City at Sun City and The Table Bay Hotel in Cape Town. 

Sun International was the pioneer of gaming in southern Africa, having brought casinos to the area in the late 1970s. Sun City is also home to the Nedbank Golf Challenge which attracts some of the world’s best golfers, as well as the hosting of Miss South Africa, World Heavyweight title fights and the Sun City Superbowl.

Buyer: Chilean investor IPS, Nueva Inversiones Pacifico Sur, has made an offer for 50.1% of South African group Sun International, lifting its shares by 22%.

IPS’ 22 rand (US$1.27) a share offer comes as Sun plans to raise 1.2 billion rand through a rights issue to boost liquidity and strengthen its balance sheet after the coronavirus lockdown.

Chile’s IPS said in a statement on Wednesday that its proposed part-cash offer also includes a bridge loan of up to 1.2 billion rand to Sun International, which is preparing to reopen its resorts after the lockdown.

It said the offer, which values the stake at 1.5 billion rand, represented a premium of 44.26% to Sun’s June 22 closing share price of 15.25 rand. Shares in Sun International jumped 22.13% to 18.10 rand after the offer was announced.

IPS, which already owns about 35% of Sun Dreams S.A, the Latin American subsidiary of Sun International, said the proposed offer would provide Sun International shareholders with an attractive alternative to the proposed rights issue, which it also intends to support and underwrite at least 50.1% of.

“We believe Sun International has an attractive portfolio of properties in Africa and Latin America which need to be protected against the devastating economic impact of the COVID-19 pandemic,” IPS Co-founder and Chairman, Claudio Fischer said in a statement.

Value Capital Partners (VCP), the second largest shareholder in Sun International, with a 20.23% stake, opposed the offer, with CEO Sam Sithole saying it “significantly” undervalues the firm.

“VCP do not believe a sale of the business at artificially depressed prices is in the interest of existing shareholders,” he said. (US$1 = 17.3083 rand)

Update: Looks like Sun International agrees with VCP…a statement issued 25th June 2020: SUN INTERNATIONAL REJECTS UNSOLICITED PROPOSALS AND PUSHES AHEAD WITH RIGHTS OFFER

Sun International rejects out of hand all reports that it is considering an unsolicited proposal made by Nueva Inversiones Pacifico Sur Limitada (IPS).

Commenting on reports, Sun International Chief Executive Anthony Leeming said, “It is surprising and unfortunate that IPS chose to go public with an unsolicited announcement that is neither an offer nor a firm commitment to make an offer. By sharing a non-offer with media they have created confusion and led to speculation in our share. They have not even discussed the offer with our major shareholders and had they done so, as we have, they would have realised their proposal has little chance of success.

Leeming confirmed that Sun has previously received several similar unsolicited, non-binding proposals from IPS. As with these previous proposals, the recent one lists stringent pre-conditions but fails to address any concerns raised by Sun International, including the significant and material litigation claim which Sun International has against IPS, as referred to in the IPS Announcement. The recent announcement was also highly irregular in that it was discussed in the media without first being first published on SENS.

“Our full focus right now is on pushing ahead with our proposed rights offer. Like most businesses the world over we have been negatively affected by the lockdown, but we are on the verge of reopening. We have a strong brand and quality offering so we are confident that we will soon regain lost ground.

The general meeting of shareholders will be held on Monday, 13 July 2020.

THPT Comment: Logical audacious move from Chilean IPS…clearly VCP and Sun International themselves not so keen! Watch this space

First Seen: Reuters
Update: from Sun International

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