SUN INTERNATIONAL LIMITED - Proposed increase of equity interest in Sun Slots (FR) Proprietary Limited

Proposed increase of equity interest in Sun Slots (FR) Proprietary Limited

SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000097580
("Sun International" or “the Company”)


PROPOSED INCREASE OF EQUITY INTEREST IN SUN SLOTS (RF) PROPRIETARY LIMITED (“SUN SLOTS”) BY MEANS
OF A SUBSCRIPTION FOR SHARES BY SUN INTERNATIONAL AND SHARE REPURCHASE BY SUN SLOTS


1.     BACKGROUND AND RATIONALE FOR THE PROPOSED TRANSACTION

       Sun Slots, which is a subsidiary of Sun International, operates under various limited pay-out machine (“LPM”)
       gaming licences in various provinces across the Republic of South Africa.

       The Sun International board has agreed to increase its equity interest in Sun Slots by way of a subscription
       for shares in Sun Slots and a share repurchase by Sun Slots of Grand Casino Investments Proprietary Limited’s
       (“GCI”) 30% equity interest in Sun Slots (“the Proposed Transaction”).

       At present, Sun International, through its wholly owned subsidiary, Sun International (South Africa)
       Limited, holds a 70% equity interest in Sun Slots. Following the Closing Date of the Proposed Transaction (as
       defined below), Sun International’s shareholding in Sun Slots will be increased to 100%.

       Aside from simplifying the shareholding of Sun Slots, the Proposed Transaction represents an opportunity for
       Sun International to increase its shareholding in Sun Slots at an attractive historical multiple of 6x EBITDA.
       Furthermore, the Proposed Transaction will, inter alia, reduce the cash leakage through reducing minority
       dividends, be cash accretive and will over time assist to further deleverage Sun International’s debt.

2.     SALIENT TERMS OF THE PROPOSED TRANSACTION

       The salient terms and conditions of the Proposed Transaction, as set out in the various agreements concluded
       between the parties on 30 August 2019 (collectively “the Agreements”) are summarised as follows:-

       •      Sun International has agreed to subscribe for the same number and class of shares as currently held
              by GCI in Sun Slots;
       •      following the subscription for the aforementioned shares by Sun International, Sun Slots will
              repurchase GCI’s 30% equity interest held in Sun Slots for an effective repurchase price of R504 million
              (“Repurchase Price”);
       •      the closing date of the Proposed Transaction will be the fifth (5th) business day immediately following
              the date upon which the last of the suspensive conditions set out in the Agreements have been
              fulfilled or waived (to the extent that they are capable of being waived) by the parties (“the Closing
              Date”);
       •      the Proposed Transaction will be subject to the fulfilment or waiver (to the extent that they are
              capable of being waived) of the suspensive conditions set out in this announcement and more fully
              described in the Agreements; and
       •      the Proposed Transaction and the Agreements will be governed by and interpreted according to the
              law of South Africa, with all disputes being finally settled under the Rules of the Arbitration Foundation
              of Southern Africa, sitting in Johannesburg, South Africa.

3.    EFFECTIVE REPURCHASE PRICE

      The Repurchase Price will be payable to GCI on the Closing Date and will be funded through a combination of
      cash resources and external debt finance.

4.    EFFECTIVE DATE OF THE PROPOSED TRANSACTION

      The Proposed Transaction will become effective on the Closing Date.

5.    NET ASSET VALUE OF AND PROFITS ATTRIBUTABLE TO SUN SLOTS

      The book net asset value of Sun Slots as at 31 December 2018 (being the date of the most recent published
      financial results), was R806 million.

      For the year ended 31 December 2018, Sun Slots generated revenue of R1,162 million, EBITDA of R287 million
      and profit after tax of R156 million.

      The Proposed Transaction and settlement of the Repurchase Price is not expected to have a material effect
      on the Company’s basic earnings, headline earnings, adjusted headline earnings and net asset value per share.

6.    SUSPENSIVE CONDITIONS TO THE PROPOSED TRANSACTION

      The Proposed Transaction is subject to, inter alia:-
      •     Sun International securing the appropriate funding approvals for the Proposed Transaction;
      •     Grand Parade Investments Limited securing approval from its shareholders in general meeting; and
      •     the obtaining of the various Gambling Board approvals.

7.    CATEGORISATION OF THE PROPOSED TRANSACTION

      The Proposed Transaction, is classified as a Category 2 transaction in terms of the JSE Listings Requirements
      and accordingly will not require Sun International shareholder approval.


By order of the board of the Company


Sandton
30 August 2019


Investec Bank
Financial Advisor and Sponsor to Sun International

Date: 30/08/2019 12:00:00
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