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SUI - Sun International Limited - Restructure of Sun International and GPI`S
Common Interests
SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN:ZAE000097580
("Sun International")
RESTRUCTURE OF SUN INTERNATIONAL AND GPI`S COMMON INTERESTS
1. INTRODUCTION AND RATIONALE
Further to the joint cautionary announcement dated 18 April 2011, Sun
International shareholders are advised that Sun International and Grand
Parade Investments Limited ("GPI") have signed a binding heads of
agreement ("the agreement") detailing the terms of a restructure of Sun
International and GPI`s common interests in certain Sun International
subsidiaries ("the Proposed Restructure").
Sun International and GPI have agreed to align their interests in
SunWest International (Proprietary) Limited ("SunWest") and Worcester
Casino (Proprietary) Limited ("Worcester") through a set of indivisibly
inter-related transactions that will result in Sun International
indirectly owning the majority of voting shares in SunWest and Worcester
and the entering into of new management and royalty agreements with
SunWest and Worcester. GPI will reduce its economic interests in SunWest
and Worcester to 25.1% whilst still maintaining significant influence
over these operations with Sun International continuing to provide
management services on a long term basis.
GPI will be released from its current empowerment lock-in structure
enabling the free trade of GPI shares by all GPI shareholders once their
BEE structure is unwound.
The Proposed Restructure will facilitate the businesses moving into the
next phase of their development whilst allowing GPI to pursue its
expansion into other gaming assets and industries outside of the casino
industry capitalising on the significant empowerment that Sun
International and GPI have jointly achieved.
The Proposed Restructure may also result in Sun International indirectly
acquiring all of the shares in Real Africa Holdings Limited ("RAH")
which Sun International does not already own ("RAH minorities") which
would create a single listed point of entry into the Sun International
Group.
The Proposed Restructure will involve the following Sun International
subsidiaries in which GPI holds an interest:
Sun GPI
International shareholding
effective
shareholding
SunWest which operates the GrandWest 59.72%* 30.04%**
Casino ("GrandWest") and the Table Bay
Hotel ("Table Bay") in Cape Town
Worcester which operates as the Golden 45.3%* 46.2%**
Valley Casino and Lodge ("Golden Valley")
RAH (excluding treasury shares) 66.45% 30.57%
* Sun International`s effective shareholding takes into account the
indirect shareholding in SunWest and Worcester held via RAH and
excludes the shareholding of the Sun international Employee Share
Trust.
** GPI`s shareholding excludes the indirect shareholding in SunWest
and Worcester held via RAH.
Subject to the fulfillment of the Pre-condition as set out in paragraph
3.2 below and subject to the fulfillment or waiver, as the case may be,
of the conditions precedent set out in paragraph 3.3 below, Sun
International (through its wholly owned subsidiary Sun International
(South Africa) Limited ("SISA") has undertaken to acquire GPI`s shares
(held directly and indirectly) in RAH as part of an offer to all of the
shareholders of RAH (other than the shares held by SISA and treasury
shares) in terms of section 124 of the Companies Act No. 71 of 2008 (as
amended by the Companies Amendment Act Number 3 of 2011) ("Companies
Act") on the terms and conditions as set out in paragraph 2.1.2 below.
If the Pre-condition is not fulfilled, then Sun International (acting
through SISA), shall not become obliged to make the aforesaid offer and
acquire GPI`s shares in RAH in terms of the aforesaid offer. This
announcement does not constitute a firm intention to make an offer for
the RAH shares or that a firm intention to make such an offer is
imminent, as contemplated in Chapter 5 of the Companies Regulations,
2011, promulgated under the Companies Act ("Takeover Regulations").
2. THE PROPOSED RESTRUCTURE
2.1 Salient terms
2.1.1 SunWest and Worcester Acquisitions
Sun International, through SISA, is proposing, subject to the
fulfillment or waiver, as the case may be, of the conditions
precedent as detailed in paragraph 3 below (the "Conditions
Precedent"), to acquire from GPI and/or its subsidiaries:
2.1.1.1 SunWest Acquisition
3 328 SunWest ordinary shares and 722 658 SunWest N shares
representing representing 0.12% of the voting rights of the
entire issued share capital of SunWest and 4.94% of the
economic value attributable to the entire issued share capital
of SunWest (collectively "SunWest Acquisition").
2.1.1.2 Worcester Acquisition
4 422 752 Worcester ordinary shares representing 21.1% of the
entire issued share capital of Worcester ("Worcester
Acquisition").
2.1.2 RAH Acquisition
Subject to the fulfillment of the Pre-condition and the
fulfillment or waiver, as the case may be, of the conditions
precedent as set out in paragraph 3.3 below, Sun
International, through SISA, will acquire from GPI its 110 641
690 ordinary shares (held directly and indirectly) in the
capital of RAH representing 30.57% of the entire issued share
capital of RAH (excluding treasury shares) ("RAH
Acquisition"), as part of an offer to all RAH shareholders,
other than SISA , in terms of section 124 of the Companies Act
("RAH Conditional Offer"). This announcement does not
constitute a firm intention to make an offer for the RAH
shares or that such a firm intention to make an offer is
imminent, as contemplated in the Takeover Regulations.
2.1.3 Restructure of management arrangements
Subject to the fulfilment or waiver, as the case may be, of
the Conditions Precedent -
2.1.3.1 the management contracts currently in place between SunWest
and Western Cape Casino Resorts Manco (Proprietary) Limited
("WC Manco") and Worcester and Winelands Casino Resorts Manco
(Proprietary) Limited ("Worcester Manco") will be cancelled
with effect from the implementation date of the Proposed
Transaction. A cancellation fee of R151 million for SunWest
and R3 million for Worcester, based on the present value of
the cash flows to the expiry of the aforementioned management
contracts, will be paid by each of SunWest and Worcester to WC
Manco and Worcester Manco respectively. WC Manco and Worcester
Manco will distribute these cancellation fees, net of any
taxation and other expenses related to that distribution, if
any, as dividends to their respective shareholders. It is
anticipated that the aforementioned distributions will result
in Sun International and GPI receiving approximately R36
million and R60 million respectively.
The distribution to be received by National Casino Resorts
Manco (Proprietary) Limited ("National Manco") by virtue of
its shareholding in WC Manco will be distributed by National
Manco to its shareholders and will be taken into account in
the calculation of the value attributed to RAH as set out in
paragraph 2.2 below due to RAH`s effective 25.3% shareholding
in National Manco.
2.1.3.2 Sun International Management Limited ("SIML") will cancel the
operating management agreements entered into between SIML and
SunWest in respect of each of GrandWest and Table Bay and
between SIML and Worcester in respect of Golden Valley with
effect from the implementation date of the Proposed
Transaction and will enter into new management and royalty
agreements between SIML and SunWest and between SIML and
Worcester (the "Management and Royalty Agreements") with the
new fee arrangement being applied from 1 July 2011.
(the SunWest Acquisition, Worcester Acquisition, restructure of
management agreements and RAH Conditional Offer are hereinafter
collectively referred to as the "Proposed Transaction"). Each of the
SunWest Acquisition, Worcester Acquisition, restructure of management
agreements and RAH Conditional Offer are indivisibly inter-related with
each other in that if any one or more of the aforesaid transactions are
not implemented for any reason whatsoever then the other transactions
shall not be implemented.
Following implementation of the Proposed Transaction, Sun
International`s and GPI`s shareholdings in the relevant operations will
be as follows:
Sun GPI
International effective
effective shareholding
shareholding
SunWest 69.84%* 25.1%
Worcester 66.70%* 25.1%
RAH 100.00%** -
* Sun International effective shareholding takes into account the
indirect shareholding in SunWest and Worcester held via RAH and
excludes the shareholding of the Sun international Employee Share
Trust.
** Assuming the RAH Conditional Offer is made and 90% acceptance by
RAH minorities is achieved and Sun International successfully
invokes the provisions of section 124 of the Companies Act in order
to compulsorily acquire the shares of the remaining (un-accepting)
RAH minorities. Should only GPI accept the RAH Conditional Offer,
Sun International will own 97.02% of the RAH shares in issue
following implementation of the Proposed Transaction.
Following implementation of the Proposed Transaction, assuming the RAH
Conditional Offer is made and 100% of the shares in RAH are acquired in
terms of the RAH Conditional Offer, Sun International`s effective
shareholding in the underlying subsidiaries in which RAH holds an
interest, other than SunWest and Worcester reflected above, will
increase as follows:
Sun International
effective shareholding
Before RAH After RAH
Conditional Conditional
Offer Offer
Afrisun Gauteng (Pty) Limited operating 84.4% 91.6%
as Carnival City
Afrisun KZN (Pty) Limited operating as 56.1% 60.7%
Sibaya
Emfuleni Resorts (Pty) Limited 62.2% 64.5%
operating as the Boardwalk
Gauteng Casino Resorts Manco (Pty) 44.6% 56.7%
Limited
KZN Manco (Pty) Limited 30.7% 34.5%
2.2 Proposed Transaction consideration
The purchase price payable in cash by Sun International for each
component of the Proposed Transaction is as follows:
(R`000)
Payable to GPI:
SunWest Acquisition 251 807
Worcester Acquisition 15 220
RAH Acquisition 451 418
Total payable to GPI: 718 445
Payable to RAH minorities, other 43 984
than GPI:
Total Transaction Consideration 762 429
(the "Proposed Transaction Consideration")
The Proposed Transaction Consideration implies a value of R4.08 per
RAH share. The aforesaid RAH price shall be increased by the cash
flows of RAH available for distribution plus a pro rata share of
the dividends to be received from RAH`s underlying investments, up
until the date that the RAH Conditional Offer is made, if
applicable, in accordance with RAH`s underlying investments
prevailing dividend policies and current practice (subject to
funding and liquidity requirements). The increase shall include
the dividend to be received by National Manco as more fully set out
in paragraph 2.1.3.1 above. For the avoidance of doubt, to the
extent that dividends are declared and paid by RAH to its
shareholders prior to implementation of the RAH Acquisition, the
aforesaid price shall not be adjusted.
3. CONDITIONS PRECEDENT
3.1 Conditions precedents applicable to the Proposed Transaction
The Proposed Transaction is conditional upon the fulfilment or
waiver, as the case may be, of, inter alia, the following
conditions precedent:
- all of the transaction agreements to give effect to the
Proposed Transaction, including the necessary sale agreements
for the sale of shares in Worcester and SunWest, the
Management and Royalty Agreements and the cancellation
agreements for the existing management contracts as set out in
paragraph 2.1.3.1 above, (collectively "the Transaction
Agreements") being signed and becoming unconditional in
accordance with their terms, which conditions include all of
the other conditions precedent set out in this paragraph 3;
- insofar as may be necessary, the consent of the JSE Limited
("JSE"), the Takeover Regulation Panel, the South African
Reserve Bank and such other regulatory authorities as may be
necessary;
- insofar as may be necessary, the approval of the Proposed
Transaction by the Competition Authorities as contemplated in
the Competition Act, No 89 of 1998, as amended;
- all relevant provincial gaming boards approving of the
Proposed Transaction;
- the approval by shareholders of GPI and Sun International of
the ordinary resolutions required to implement the Proposed
Transaction.
3.2 Pre-condition to RAH Conditional Offer
Sun International`s (through SISA) obligation to make the RAH
Conditional Offer will be subject to the fulfilment of the pre-
condition that by no later than 15 December 2011 (or such other
date as may be agreed to between Sun International and GPI) the
Transaction Agreements are signed and become unconditional in
accordance with their terms, save for any condition in the
Transaction Agreements requiring that the RAH Conditional offer
must have become unconditional ("the Pre-condition"). Once the
Transaction Agreements are signed and have become unconditional in
accordance with their terms, the RAH Conditional Offer will be made
but will be made subject to the conditions precedent set out in
paragraph 3.3 below.
If this Pre-condition is not fulfilled, Sun International shall not
become obliged to make the RAH Conditional Offer.
3.3 Condition precedent to the RAH Conditional Offer
The RAH Conditional Offer, once made as contemplated in paragraph
3.2 above, will be subject to the fulfilment or waiver (as the case
may be) of the following conditions precedent, namely that by no
later than 15 December 2011 (or such other date as may be agreed to
between SISA and GPI) all of the necessary regulatory approvals
and/or consents to effect the RAH Conditional Offer, to the extent
required, have been granted, including, but not limited to, the
Takeover Regulation Panel, the JSE and/or the relevant gaming
boards.
4. UNAUDITED PRO-FORMA FINANCIAL EFFECTS
The unaudited pro-forma financial effects set out below have been
prepared for illustrative purposes only to assist Sun International
shareholders to assess the impact of the Proposed Transaction on the
earnings per share ("EPS"), headline earnings per share ("HEPS"),
adjusted HEPS and net asset value ("NAV") per share of Sun
International. The unaudited pro-forma financial effects are based on
Sun International`s unaudited results for the six months ended
31 December 2010.
These unaudited pro-forma financial effects have been disclosed in terms
of the JSE Listings Requirements and because of their nature may not
fairly present Sun International`s financial position, changes in
equity, results of operations or cash flows. The unaudited pro-forma
financial effects are the responsibility of the directors of Sun
International.
The impact on Sun International is outlined below:
Per Sun Notes Before the After the % Change
International Proposed Proposed
ordinary share Transaction Transaction
(cents) (cents)
EPS 1,2 156 112 (28.2%)
HEPS 1,2 157 118 (24.8%)
Adjusted HEPS 1,3 218 217 (0.5%)
NAV 4,5 13.49 6.65 (50.7%)
Notes
1. The EPS, HEPS and adjusted HEPS as set out in the "Before" column
are based on the unaudited income statement of Sun International
for the six months ended 31 December 2010. The EPS, HEPS and
adjusted HEPS as set out in the "After" column assumes that the
Proposed Transaction was implemented on 1 July 2010.
2. For purposes of calculating earnings and headline earnings "after
the Proposed Transaction", it was assumed that the Proposed
Transaction consideration was settled using R762 million of
preference share funding at a rate of 6.8 %.
3. For purposes of calculating adjusted HEPS "after the Proposed
Transaction", it was assumed that:
- the Proposed Transaction consideration was settled using R762
million of preference share funding at a rate of 6.8 %;
- effects of the cancellation fee resulting from the
cancellation of the management agreements were excluded.
4. The NAV per share as set out in the "Before" column is based on the
unaudited balance sheet of Sun International as at 31 December
2010. The "After" column assumes the Proposed Transaction was
implemented on 31 December 2010.
5. For purposes of calculating the net asset value per share "after
the Proposed Transaction", it was assumed that:
- the acquisition consideration is settled using R762 million of
preference share funding;
- the excess of the Proposed Transaction consideration over the
carrying value of the net assets acquired is recognised
directly in equity and amounted to R687 million.
The impact on EPS and HEPS is largely due to the once off charge
relating to the cancellation of the Manco contracts. The NAV reduction
is due to a significant difference between the purchase consideration,
which is based on a current valuation, and the low historic book value
of the assets being acquired.
5. RELATED PARTY AND CATEGORISATION OF THE PROPOSED TRANSACTION
Sun International shareholders are advised that in terms of the Listings
Requirements of the JSE, due to GPI being a material shareholder in
certain of Sun International`s subsidiaries, GPI is deemed to be a
related party to Sun International and the Proposed Transaction is
deemed to be a "related party transaction". As such, Sun International
shareholder approval of the terms of the Proposed Transaction will be
required in a general meeting.
In terms of the Listings Requirements of the JSE, the Proposed
Transaction would be categorised as a category 2 transaction for Sun
International.
6. DOCUMENTATION
A circular providing information on the Proposed Transaction and
incorporating a notice convening the necessary Sun International general
meeting will be posted to Sun International shareholders in due course.
7. WITHDRAWAL OF CAUTIONARY
Sun International shareholders are referred to the joint cautionary
announcement of 18 April 2011 and are advised that it is hereby
withdrawn.
By order of the board of directors
Sun International
Johannesburg
16 May 2011
Investment bank and Corporate law adviser to Sun
transaction sponsor to Sun International
International
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Date: 16/05/2011 08:00:01 Supplied by www.sharenet.co.za
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