South African Hospitality Property Fund Acquires Tsogo Casinos

Date: July 2018

Location: South Africa

Name: Tsogo Sun – The casinos include Montecasino, Gold Reef City Casino, Silverstar, Suncoast, Blackrock, Emnotweni and The Ridge.

Tsogo Montecasino

No. of Keys

Seller: Tsogo Sun, a company listed on the JSE (Johannasburg Stock Exchange) and encompasses a portfolio of 13 casinos and entertainment destinations, located across 6 provinces in South Africa, as well as over 100 hotels in South Africa, Africa, the Seychelles and the Middle East.

This includes individually branded luxury hotels, full service through to select service and properties catering to the budget conscious travellers.

The portfolio includes a variety of theatres, cinemas, more than 300 restaurants and bars; and over 250 conference and banqueting facilities, including the Sandton Convention Centre.

“Upon completion of the transaction, Tsogo will hold approximately 87 percent of the shares in Hospitality. It is Tsogo’s ultimate intention to unbundle their shareholding in Hospitality to its shareholders,” Tsogo said.

The casinos will be subject to an effective 20-year triple net lease, which Hospitality says will provide a stable, escalating and predictable income stream and distribution for its shareholders. It says this will reduce the impact of the volatility of existing hotel rental income. Its increased scale will also help lower the cost of funding.

Tsogo’s chief executive Jacques Booysen had also expressed the company’s intentions to expand further into Africa, with plans to open a Garden Court in Zambia, and a Southern Sun Hotel in Ghana.

Buyer: Hospitality Property Fund

Hospitality said the transaction was aimed at broadening its earnings base, while Tsogo said it was in line with plans to restructure into three separately listed operating divisions focused on property, gaming and hotel management.

Just over a year ago, Tsogo sold 29 hotels to Hospitality for R3.6 billion in cash and shares to reduce its direct exposure to the hotels industry and focus on entertainment and gambling.

Price: ZAR23bn (US$1.72bn)

THPT Comment: With Protea having been sold to Marriott in 2014, for US$186m, Tsogo must be SA’s leading hotel group

First Seen: Reuters