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Sun International partners with a strategic international hotel operator in its African Assets
SUN INTERNATIONAL LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/007528/06)
Share code: SUI
ISIN: ZAE000097580
("Sun International" or "Company")
SUN INTERNATIONAL PARTNERS WITH A STRATEGIC INTERNATIONAL HOTEL OPERATOR IN
ITS BOTSWANA, LESOTHO, NAMIBIA, SWAZILAND AND ZAMBIA OPERATIONS ("African
Assets")
1. INTRODUCTION AND SALIENT TERMS
Shareholders of Sun International are hereby advised that agreements have been entered into between
Sun International and Minor International Public Company Limited ("MINT") whereby Sun International will
dispose of a significant portion of its interests in the African Assets to a foreign subsidiary of MINT ("the
Proposed Transaction"). The investment by MINT will be a combination of an acquisition of existing
shares from the relevant Sun International subsidiaries and the acquisition of an interest in the operating
management agreements whereby Sun International Management Limited provides management and
related services in respect of each of the African Assets. MINT will also commit to invest into those
operations that require refurbishment in the short to medium term.
Sun International’s effective interest pre and post the Proposed Transaction is set out in the table below:
Ownership pre Ownership post
Asset the Proposed % disposed the Proposed
Transaction Transaction
Gaborone Sun (Botswana) 80% 80% 16%
Kalahari Sands (Namibia) 100% 80% 20%
Lesotho Sun and Maseru Sun (Lesotho) 47% 80% 9%
Royal Swazi and Ezulwini Sun (Swaziland) 51% 80% 10%
Royal Livingstone and Zambezi Sun
(Zambia) 100% 50% 50%
Sun International will continue to manage the casino operations situated at each of the African Assets
and MINT will assume day-to-day management responsibility for the hotel operations other than Zambia
which will be jointly managed under a joint venture arrangement. The acquisition of the interests in the
operating management agreements will result in a consequent division of the management fees
commensurate with responsibilities.
The collective net purchase consideration amounts to R664 million plus the face value of any shareholder
loans (shareholder loans to be acquired in same proportion to equity, currently valued at R12 million as at
31 July 2014) on the closing date, being the last day of the month in which all the conditions precedent
set out in paragraph 4 below are fulfilled.
The agreements to give effect to the Proposed Transaction are all inter-conditional as the African Assets
are being sold as a “portfolio”.
The only African operation in which Sun International has an interest (excluding its South African
operations) and which does not currently form part of the Proposed Transaction is its investment in the
Tourist Company of Nigeria (“TCN”) the owner of the Federal Palace, Lagos, Nigeria. Sun International
and MINT are in discussions regarding a possible investment by MINT in TCN.
2. RATIONALE FOR THE PROPOSED TRANSACTION
The Proposed Transaction and the partnership with MINT in Africa are in line with Sun International’s
strategy to optimize its capital allocation and resources. The Proposed Transaction enables Sun
International to remain invested in the African Assets but with responsibility for the casino component
only, as well as to partner with MINT in other African opportunities that have a casino element. In
addition, MINT will commit its pro rata share of new capital expenditure to realize the revenue potential of
the African Assets, thus giving Sun International more room to consider capital investment opportunities
elsewhere. Going forward Sun International will be able to give greater focus to opportunities identified
in Latin America and Asia (where MINT has a strong presence) as further key growth markets for its core
casino business.
Given that MINT does not operate or manage casinos (and has no intention to), there is the basis for a
natural partnership of complementary skills and strategy. The Proposed Transaction provides an
opportunity for Sun International to create a strategic alliance with a leading international hospitality and
leisure operator that brings not only hotel management and marketing expertise but also an ability and
desire to invest into the assets under its management. Starting with the existing African Assets, it is the
intention of the alliance to explore other hotel and gaming opportunities in particular those that may arise
in Africa and Asia, where MINT would manage the hotel component and Sun International would manage
the casino component.
In addition to the strategic rationale above, with MINT now taking the bulk of management responsibility
for the African Assets, the Proposed Transaction allows Sun International and its management team to
increase their focus on those properties in its existing portfolio that are driving the group’s financial
performance and strategy.
The sale proceeds from the Proposed Transaction will be used to reduce group debt and provide capacity
for the expansion initiatives of Sun International.
Sun International will remain as a minority shareholder and partner in the African Assets, other than
Zambia where it retains a 50% interest, and will continue to benefit in the future growth of these assets.
3. BACKGROUND ON MINT
MINT is a global company focused on three primary businesses including hotels, restaurants and lifestyle
brands distribution.
The shares of MINT are listed on the Stock Exchange of Thailand. Its current market capitalisation is Thai
Baht 132 billion (in excess of US$4.1 billion). In 2013 MINT generated in excess of US$1.1 billion in
revenues and net profit of over US$130 million.
MINT is a hotel owner, operator and investor with a portfolio of 110 hotels and serviced suites under the
Anantara, AVANI, Oaks, Per AQUUM Elewana, Four Seasons, St. Regis, Marriott, Radisson Blu and
Minor International brands. MINT’s hotel portfolio includes properties in Thailand, Australia, New Zealand,
Maldives, Vietnam, the Middle East, Sri Lanka, China, Malaysia, Indonesia and Cambodia. In Africa it has
invested in game lodges and hotels in Tanzania, Kenya, and Mozambique and the Proposed Transaction
is a complementary fit to these assets. MINT is one of Asia’s largest restaurant companies with over
1,500 outlets in 20 countries. It is also one of Thailand’s largest distributors of lifestyle brands such as
Gap, Esprit and Tumi.
4. CONDITIONS PRECEDENT
The Proposed Transaction is conditional upon the fulfilment or waiver, as the case may be of, inter alia,
the following conditions precedent:
- The waiver by third party shareholders of any pre-emptive rights which they may have in respect
of the Proposed Transaction, or their failure to exercise such rights;
- The conclusion of transaction documents, including, inter alia, shareholders agreements, voting
pool agreements (if applicable) and agreements to give effect to the assignment of rights in the
operating management agreements; and
- Satisfactory receipt of all regulatory approvals, including the relevant gaming boards and
competition authority approvals.
5. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION
The 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 pro-forma financial effects are based on Sun International`s results for the six months ended 31
December 2013.
These pro-forma financial effects have been disclosed in terms of the JSE Listings Requirements (“the
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 pro-forma financial effects are the
responsibility of the directors of Sun International.
The impact on Sun International is outlined below:
Before %
Per Sun International ordinary share (cents)1 After (cents) change
Basic EPS(2) 324 657 102.8%
HEPS(3) 326 309 (5.2%
Adjusted HEPS(3) 335 320 (4.5%)
NAV(5) 2,272 2 638 16.1%
Weighted average number of share in issue (million) 93.246 93.246 0.00%
Weighted average number of shares in issue (million) used in
the Adjusted HEPS calculation 103.845 103.845 0.00%
Shares in issue as at 31 December 2013 (million) 93.371 93.371 0.00%
Notes:
1. The EPS, HEPS and Adjusted HEPS set out in the "Before" column are based on the unaudited
profit and cash dividend announcement of Sun International for the six months ended 31 December
2013. The EPS, HEPS and adjusted HEPS set out in the "After" column assume that the Proposed
Transaction was implemented on 1 July 2013.
2. EPS, is based on the following principal assumptions:
(i) the Proposed Transaction was effective from 1 July 2013;
(ii) Interest saving of R24 million assuming the purchase consideration received by Sun
International is utilised to redeem redeemable preference shares at a rate of 6.9% per
annum;
(iii) estimated once-off transaction costs of R5 million;
(iv) Sun International continues to earn a management fee (post the deduction of the country-
specific withholdings tax) based on its management responsibilities.
3. HEPS and Adjusted HEPS effects are based on the following principal assumptions:
(i) Exclusion of R326 million profit on disposal as this does not form part of headline
earnings.
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 2013. The "After" column assumes the Proposed Transaction
was implemented on 31 December 2013.
5. NAV per share effects are based on the following principal assumptions:
(i) the remaining investments in Botswana, Zambia and Namibia are accounted for as investments
in associates and are recorded on initial recognition at fair value.
(ii) the remaining investments in Lesotho and Swaziland are accounted for as assets available for
sale and are carried at fair value;
(iii) the purchase consideration of R663.6 million was utilised to reduce Group liabilities; and
(iv) all effects are of a recurring nature except where otherwise stated.
6. CATEGORISATION
In terms of the JSE Limited Listings Requirements, as the value of the Proposed Transaction, in so far as
it relates to Sun International, exceeds 5% but is less than 25% of Sun International’s market
capitalisation, it meets the definition of a category 2 transaction.
By order of the board
Sandton
18 August 2014
Investment Bank to Sun International
Investec Bank Limited
Sponsor to Sun International
RAND MERCHANT BANK, a division of FirstRand Bank Limited
Legal advisor to Sun International
Cliffe Dekker Hofmeyr Inc
Date: 18/08/2014 07:26:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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