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Settlement of dispute and proposed disposal by Sun Latam SPA of its remaining 50% equity interest in Sun Dreams SA
SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000097580
LEI: 378900835F180983C60
("Sun International" or “the Company” or “the group”)
SETTLEMENT OF DISPUTE WITH NUEVA INVERSIONES PACIFICO SUR LIMITADA (“PACIFICO”) AND PROPOSED DISPOSAL
BY SUN LATAM SPA (“SUN LATAM”) OF ITS REMAINING 50% EQUITY INTEREST IN SUN DREAMS S.A. (“SUN DREAMS”)
1. INTRODUCTION
Shareholders are referred to the Stock Exchange News Service (“SENS”) announcement released on the
Johannesburg Stock Exchange (“JSE”) on 30 April 2019 when shareholders were advised that Nueva Inversiones
Pacifico Sur Limitada (“Pacifico”) and Sun International’s subsidiary, Sun Latam in Chile, had entered into a share
purchase agreement, whereby Pacifico had agreed to purchase 14.94% of Sun Latam’s shareholding in Sun Dreams
for the sum of US$85.8 million, which would result in each party holding a 50% equity interest in Sun Dreams (“the
Initial Transaction”).
Shareholders are further referred to the SENS announcement released by the Company on 26 June 2020 advising
that Sun Latam and Pacifico (collectively “the Parties”) had become embroiled in a dispute regarding the Initial
Transaction and that Sun Latam had initiated arbitration proceedings against Pacifico before the International
Chamber of Commerce in Chile to resolve the dispute.
Following the impact of the Covid-19 pandemic on the group and taking into consideration the challenges facing
Latin America (“Latam”) and South Africa, plus the length of time, uncertainty and costs associated with
arbitration proceedings in a foreign country, the Parties have reached agreement whereby: -
• Sun Latam and Pacifico have agreed to settle their dispute in respect of the Initial Transaction and to
implement the transfer of Sun Latam’s 14.94% equity interest in Sun Dreams to Pacifico on the basis set
out below and in terms of a settlement agreement to be concluded by the Parties; and
• Pacifico has agreed, subject to obtaining Sun International shareholder and SCJ (Chilean casino regulator)
approvals, to acquire Sun Latam’s remaining 50% equity interest in Sun Dreams (“the Proposed
Transaction”), on terms and conditions as more fully set out below and in the Share Purchase Agreement
(“SPA”) concluded between the Parties on 20 August 2020.
The net effect of the above is that Pacifico will have acquired Sun Latam’s (99.2% owned by Sun International)
64.94% equity interest in Sun Dreams for US$160 million which equates to a 2019 historical multiple of 5.5X
EBITDAR which may increase to a 6.5x multiple subject to certain future earnouts being achieved as detailed in
the SPA. Accordingly, and on closing of the Proposed Transaction, Pacifico will become the sole shareholder of
Sun Dreams.
2. SETTLEMENT OF DISPUTE WITH PACIFICO
Shareholders are advised that simultaneously with the execution of the SPA, the Parties have agreed to settle
their dispute in respect of the Initial Transaction on the basis that Pacifico will, within ten business days of the
execution of the SPA, transfer US$60 million into an Escrow account held by an Escrow agent, which amount will
be released and paid to Sun Latam on fulfilment of the suspensive conditions set out in the SPA and following the
entering into of a settlement agreement (which forms an annexure to the SPA) between the Parties within 5
business days thereafter. Contemporaneously with the payment by Pacifico of the US$60 million to Sun Latam,
Sun Latam will conclude the transfer of its 14.94% equity interest in Sun Dreams to Pacifico.
The proceeds from the settlement payment made by Pacifico to Sun Latam will be used to settle and extinguish
Sun International’s offshore debt in Latam of Clp30.1 billion ($38.3 million) with the balance being repatriated
back to South Africa.
3. RATIONALE FOR THE PROPOSED TRANSACTION
The Covid -19 pandemic has had a major impact on the group’s operations both in South Africa and Latam.
Although Sun Dreams has an attractive portfolio of assets and a number of opportunities for growth, it is, at the
same time, facing several challenges, including the need to renew its SCJ casino licences, political and social
reforms in Chile and the need to secure funding for its Iquique project. Furthermore, Sun Latam is involved in
arbitration with its partner in Sun Dreams, Pacifico, which the Parties wish to resolve. Pacifico is also looking to
invest further in the industry and is seeking to increase its interest in Sun Dreams.
With Pacifico looking to increase its interest in Sun Dreams and the various challenges that the group is facing, the
Company has been presented with an opportunity to realise and exit its investment in Sun Dreams at an attractive
historical multiple given the circumstances with the potential for further earnout payments. The proceeds from
the Proposed Transaction will be used to further reduce Sun International’s debt in South Africa, thereby further
strengthening its balance sheet and eliminating interest charges from Latam.
4. DETAILS REGARDING PACIFICO
Pacifico is a limited liability company, constituted under Chilean law and established in 2014, which acts as an
investment holding company as a result of a merger between Inversiones Pacifico Sur Limitada and Nueva Dos
Salmones Limitada to create Nueva Inversiones Pacifico Sur Limitada.
Pacifico’s major shareholders and directors are the brothers Claudio and Humberto Fisher Llop, who also control
a corporate group with investments in diverse fields, such as, among others, real estate development, agriculture,
and entertainment.
Pacifico and Sun Latam are the current shareholders of Sun Dreams.
5. SALIENT TERMS OF THE PROPOSED TRANSACTION
The salient terms and conditions of the Proposed Transaction, as set out in the SPA, are as follows: -
• Sun Latam has agreed to dispose of its 6 674 732 ordinary shares held in Sun Dreams, representing 50% of
the issued ordinary share capital of Sun Dreams, to Pacifico;
• the closing date which will be the effective date of the Proposed Transaction will be the fifth business day
after the date on which the last of the suspensive conditions set out in the SPA have been fulfilled (or where
applicable waived) by the Parties (“the Closing Date”);
• pending Sun International shareholder and SCJ approvals being secured, Pacifico shall guarantee the
payment of the future earnouts (referred to in section 6 hereof and in the SPA) by pledging sufficient
shares held in Sun Dreams to Sun Latam to cover the full extent of its liability;
• the Proposed Transaction will be subject to the standard warranties and indemnities associated with
transactions of this nature, as well as the fulfilment (or where applicable waiver) of the suspensive
conditions set out in this announcement and more fully described in the SPA; and
• the Proposed Transaction will be governed by and interpreted according to the laws of Chile, with all
disputes being finally settled under the Rules of Arbitration of the International Chamber of Commerce,
sitting in Santiago, Chile.
6. PURCHASE CONSIDERATION
The purchase price payable by Pacifico to Sun Latam to acquire Sun Latam’s remaining 50% equity interest in Sun
Dreams will be the sum of US$100 million (“Purchase Consideration”), of which US$85 million will be paid to Sun
Latam on the Closing Date and US$15 million will be held in an Escrow account as security for the discharge by
Sun International of certain indemnity obligations assumed by Sun International when Dreams initially merged
with Sun International in 2016. The indemnity obligations relate to a tax claim made by the Chilean revenue
authorities regarding the deductibility of free play. It is anticipated that this matter will be resolved in the near
future.
In addition to the Purchase Consideration, Pacifico will be liable to pay Sun Latam a further maximum amount of
42 340 000 000 Chilean Pesos (approximately US$53 million based on a US$/Chilean Peso exchange rate of Clp794
to $1 at 19 August 2020) subject to certain earnouts being achieved which are linked to the renewal of four SCJ
gaming licences in Chile and Sun Dreams achieving certain minimum future EBITDAR following the licence
renewals, as more fully set out in the SPA.
7. EFFECTIVE DATE OF THE PROPOSED TRANSACTION
The Proposed Transaction will become effective on the Closing Date.
8. NET ASSET VALUE OF AND PROFITS ATTRIBUTABLE TO SUN DREAMS
The book net asset value of the shareholding held by Sun International in Sun Dreams as at 31 December 2019
(being the date of the most recent published financial results), was US$244 million.
For the year ended 31 December 2019, Sun Dreams generated revenue of US$381 million, EBITDA of US$89 million
and profit after tax of US$17 million.
9. SUSPENSIVE CONDITIONS TO THE PROPOSED TRANSACTION
The Proposed Transaction is subject to the fulfilment (or where applicable waiver) of the following suspensive
conditions: -
• the approval of the Proposed Transaction by the Sun International shareholders in general meeting, on or
before 31 December 2020;
• the approval of the SCJ (Chilean casino regulator) will have been obtained on or before 31 December 2020;
• no action or proceedings will have been instituted or remain pending against the other Party which could
prevent or could reasonably be expected to prevent the consummation of the Proposed Transaction; and
• each of the Parties will have performed and satisfied each of its covenants and obligations as at the Closing
Date as set out in the SPA.
10. CATEGORISATION OF THE PROPOSED TRANSACTION AND SHAREHOLDER APPROVAL
In terms of the JSE Listings Requirements, the Proposed Transaction is classified as a Category 1 transaction and
will require Sun International shareholder approval. Accordingly, a circular to shareholders will be posted within
60 days of the date of this announcement containing, among others, a notice of general meeting.
By order of the board of the Company
Sandton
21 August 2020
Financial Advisor and Sponsor to Sun International
INVESTEC BANK LIMITED
Date: 21-08-2020 08:30:00
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