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TSOGO SUN HOLDINGS LIMITED - Acquisition by Tsogo of a minority interest in each of Sunwest and Worcester

Release Date: 13/05/2014 08:00
Code(s): TSH     PDF:  
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Acquisition by Tsogo of a minority interest in each of Sunwest and Worcester

TSOGO SUN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1989/002108/06
Share Code: TSH ISIN: ZAE000156238
(“Tsogo”)


     ACQUISITION BY TSOGO OF A MINORITY INTEREST IN EACH OF SUNWEST AND WORCESTER



1.   Introduction

      The board of directors of Tsogo is pleased to announce that on 12 May 2014, Tsogo, Sun International
      Limited (“Sun International”), Grand Parade Investments Limited (“GPI”), and various of Sun
      International and GPI’s subsidiaries entered into transaction agreements (the “Transaction
      Agreements”) in terms of which Tsogo will acquire a 40% equity interest in each of SunWest International
      Proprietary Limited (“SunWest”) and Worcester Casino Proprietary Limited (“Worcester”) (collectively,
      the “Proposed Transaction”) for an aggregate consideration of R2,185 million.

      In terms of the Proposed Transaction, Tsogo will acquire a 14.9% equity interest in SunWest and a 14.9%
      equity interest in Worcester from Sun International (South Africa) Limited (“SISA”), a wholly-owned
      subsidiary of Sun International, and Afrisun Leisure Proprietary Limited, a subsidiary of Sun International,
      respectively, for an aggregate consideration of R635 million. Tsogo will subscribe for new shares in
      SunWest and Worcester for an aggregate subscription price of R1,550 million and each of SunWest and
      Worcester will undertake a specific share repurchase for the entire equity interest held by GPI and its
      subsidiaries in SunWest and Worcester for an aggregate cash consideration of R1,550 million.

      The Proposed Transaction is subject to the fulfilment (or waiver, as the case may be) of the conditions
      precedent referred to in paragraph 5 below, and the effective date of the Proposed Transaction will be the
      third business day following the date when all the conditions precedent are fulfilled or waived (“Effective
      Date”).

2.   Information about SunWest and Worcester

      SunWest

      SunWest, a subsidiary of SISA, conducts the casino, leisure and entertainment business in respect of the
      GrandWest Casino and Entertainment World at Goodwood in Cape Town. SunWest also owns the hotel
      business in respect of the Table Bay Hotel situated at the Victoria & Alfred Waterfront in Cape Town and
      owns a 24.8% equity interest in the Cape Town International Convention Centre Company SOC Limited.
      The current equity interests in SunWest, prior to the Proposed Transaction, are as follows:

       Shareholder                                                                                % equity
                                                                                                  interest
       SISA and its subsidiaries                                                                        71.6%
       GPI and its subsidiaries                                                                         25.1%
       Sun International Employee Share Trust (“SIEST”)                                                  3.3%

      Worcester

      Worcester, a subsidiary of SISA, conducts the casino, hotel, leisure and entertainment business in

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     respect of the Golden Valley Casino at Breede River Valley in Worcester.

     The current equity interests in Worcester, prior to the Proposed Transaction, are as follows:

      Shareholder                                                                                    % equity
                                                                                                     interest
      SISA and its subsidiaries                                                                            71.4%
      GPI                                                                                                  25.1%
      SIEST                                                                                                 3.5%

3.   Rationale

     The Proposed Transaction represents an attractive investment opportunity for Tsogo which will provide
     Tsogo with an interest in quality casino assets in an area where Tsogo has limited exposure. The
     Proposed Transaction is consistent with Tsogo’s growth strategy of allocating capital to attractive
     opportunities in the hotel and gaming sector.

4.   Terms of the Proposed Transaction

     4.1.   Purchase consideration

            The aggregate consideration payable by Tsogo in terms of the Proposed Transaction is
            R2,185 million which will be settled in cash on the Effective Date and will be funded from Tsogo’s
            existing resources.

     4.2.   Tsogo’s participation in SunWest and Worcester

            Tsogo will be a minority shareholder in SunWest and Worcester and will not have any operational
            responsibilities. All operations of each of SunWest and Worcester will continue to be managed by
            Sun International Management Limited, a subsidiary of Sun International, under its existing
            management contracts.

            The equity interests in SunWest and Worcester after implementation of the Proposed Transaction
            will be as follows:

             Shareholder                                                      SunWest            Worcester
                                                                              % equity           % equity
                                                                               interest           interest
             SISA and subsidiaries                                                   56.7%              56.5%
             Tsogo                                                                   40.0%              40.0%
             SIEST                                                                    3.3%               3.5%


5.   Conditions precedent

     The Proposed Transaction is subject to the fulfilment (or waiver, where applicable) of, inter alia, the
     following conditions precedent:

     5.1.   the shareholders of GPI having approved the Proposed Transaction, in accordance with the terms
            of the Transaction Agreements;




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     5.2.   the requisite resolutions of the shareholders of GPI (referred to in paragraph 5.1) shall not have
            been set aside by the court in accordance with sections 115(7) of the Companies Act;

     5.3.   independent experts appointed by SunWest and Worcester in terms of section 114(2) of the
            Companies Act having delivering to the respective boards and the shareholders of those
            companies the report referred to in section 114(3) of the Companies Act;

     5.4.   the shareholders and directors of SunWest and Worcester passing the necessary resolutions for
            implementation of the Proposed Transaction and the lodging of any applicable notices of
            amendment to the Memorandum of Incorporation having been filed with the Companies and
            Intellectual Property Commission;

     5.5.   the release of GPI and its subsidiaries’ shares in SunWest and Worcester from the security
            interests held over them;

     5.6.   the requisite approvals for the Proposed Transaction having been obtained from the JSE Limited
            (“JSE”), the Takeover Regulations Panel, the relevant provincial Gambling Authorities and the
            Competition Authorities; and

     5.7.   the shareholders of Sun International approving the placing of shares under the control of the
            directors of Sun International to give effect to an undertaking in terms of which, in the event that an
            offeror acquires 35% or more of the issued shares of Sun International, Sun International may be
            required to issue shares in Sun International to Tsogo in exchange for some or all of Tsogo's
            shares in SunWest and Worcester.

6.   Pro forma financial effects

     The pro forma financial effects of the Proposed Transaction on Tsogo’s historical earnings, headline
     earnings, net asset value and net tangible asset value are not significant.

7.   Categorisation

     In terms of the Listings Requirements of the JSE, the Proposed Transaction constitutes a category 2
     transaction for Tsogo and, accordingly, does not require approval by Tsogo shareholders.

     Fourways
     13 May 2014

     Investment bank and transaction sponsor
     Investec Bank Limited

     Corporate law adviser
     Tabacks Incorporated

     Sponsor
     Deutsche Securities (SA) Proprietary Limited




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