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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 4 April 2016, Tsogo Sun Gaming
Proprietary Limited (“Tsogo Sun Gaming”), a subsidiary of Tsogo, Sun International Limited (“Sun
International”) and certain of its subsidiaries (collectively, “Sun International Sellers”), Grand Parade
Investments Limited (“GPI”) and certain of its subsidiaries (collectively “GPI Sellers”), entered into an
agreement ( “Transaction Agreement”) in terms of which Tsogo Sun Gaming will acquire a 20% interest
in each of SunWest International Proprietary Limited (“SunWest”) and Worcester Casino Proprietary
Limited (“Worcester”), for an aggregate consideration of R1,350 million (“Proposed Transaction”).
In terms of the Proposed Transaction, Tsogo Sun Gaming will acquire:
(i) a 10% voting and economic interest in SunWest and a 10% voting and economic interest in
Worcester from the Sun International Sellers, respectively, for an aggregate consideration of
R675 million (“Sun International Acquisition”); and
(ii) a 10% voting and economic in SunWest and a 10% voting and economic interest in Worcester
from the GPI Sellers, respectively, for an aggregate consideration of R675 million (“GPI
Acquisition”).
The GPI Acquisition is conditional on (i) GPI obtaining the requisite shareholder approval for the GPI
Acquisition; (ii) the release of the shares, the subject of the GPI Acquisition, from the security
arrangements in favour of The Standard Bank of South Africa Limited and Nedbank Limited, to which they
are subject, and (iii) the Sun International Acquisition having been implemented, by 30 June 2016 (which
date may be extended by GPI in respect of (i) and (ii) above for a further period not exceeding 30 days).
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In the event that the GPI Acquisition does not become unconditional by such date or extended date, Sun
International will increase the shares disposed of under the Sun International Acquisition such that Tsogo
Sun Gaming will acquire further voting and economic interests in each of SunWest and Worcester from
the Sun International Sellers in order to bring Tsogo Sun Gaming’s aggregate economic interest in each
of SunWest and Worcester to 20% (“Additional Sun International Acquisition”).
The Proposed Transaction, itself, is subject to the fulfilment (or waiver) of the condition precedent referred
to in paragraph 5 below, and the respective effective dates of the Sun International Acquisition, the GPI
Acquisition or, failing the GPI Acquisition, the Additional Sun International Acquisition, will be the
respective dates of payment of the first instalment of the purchase consideration due, in respect of each
acquisition.
2. Rationale
The Proposed Transaction represents an attractive investment opportunity for Tsogo which will provide
Tsogo with an interest in quality casino assets in the Western Cape, 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.
3. Information about SunWest and Worcester
SunWest
SunWest 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.
The voting and economic interests in SunWest after the implementation of the Proposed Transaction, will
be as follows:
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Shareholder Sun International and GPI sell Sun International sells 20%
10% each
% voting % economic % voting % economic
interest interest interest interest
Sun International 50.05% 61.60% 50.01% 51.60%
GPI 29.93% 15.10% 49.89% 25.10%
Tsogo (through Tsogo 20.00% 20.00% 0.09% 20.00%
Sun Gaming)
Sun International 0.01% 3.30% 0.01% 3.30%
Employee Share Trust
(“SIEST”)
Worcester
Worcester conducts the casino, hotel, leisure and entertainment business in respect of the Golden Valley
Casino at Breede River Valley in Worcester.
The voting and economic interests in Worcester after the implementation of the Proposed Transaction,
will be as follows:
Shareholder Sun International and GPI sell Sun International sells 20%
10% each
% voting % economic % voting % economic
interest interest interest interest
Sun International 61.40% 61.40% 51.40% 51.40%
GPI 15.10% 15.10% 25.10% 25.10%
Tsogo (through Tsogo 20.00% 20.00% 20.00% 20.00%
Sun Gaming)
SIEST 3.50% 3.50% 3.50% 3.50%
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4. Terms of the Proposed Transaction
4.1. Purchase consideration
The aggregate consideration payable by Tsogo Sun Gaming in terms of the Proposed Transaction
is R1,350 million (the “Purchase Consideration”) which will be settled in cash and will be funded
from Tsogo’s existing resources.
The Purchase Consideration is calculated based on the aggregate of the forecast earnings before
interest, taxes, depreciation and amortisation (“EBITDA”) to 30 June 2016 of both SunWest and
Worcester and the aggregate of the forecast net debt position at 30 June 2016 of both SunWest
and Worcester. In the event that the aggregate of the 30 June 2016 actual EBITDA is less than the
aggregate of the forecast 30 June 2016 EBITDA by more than R25 million then an adjustment will
be made to the Purchase Consideration. The Purchase Consideration will also be adjusted for any
variation in the aggregate of the 30 June 2016 actual net debt from the aggregate of the forecast 30
June 2016 net debt.
Tsogo Sun Gaming will settle the Purchase Consideration through the payment of 18 monthly
instalments.
4.2. Tsogo’s participation in SunWest and Worcester
Tsogo (through Tsogo Sun Gaming) will be a minority shareholder in both SunWest and Worcester,
will have no representation on the boards of directors of SunWest and Worcester and will not have
any operational responsibilities. All operations of SunWest and Worcester will continue to be
managed by Sun International Management Limited, a subsidiary of Sun International, under its
existing management contracts.
Tsogo will not have access to any information regarding SunWest and Worcester, except for
information to which it has statutory rights as a shareholder (which will include the audited financial
statements of SunWest and Worcester) and for information which is in the public domain.
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4.3. Put Option
In the event that any party (and/or parties acting in concert with it) (“Offeror”) acquires 35% or
more of the issued ordinary shares of Sun International, excluding treasury shares (“Trigger
Shareholding”) or makes an offer or causes a scheme of arrangement or any other transaction or
arrangement to be proposed which, if implemented, will result in the Offeror holding a Trigger
Shareholding or acquiring all or the greater part of the assets or undertaking of Sun International
(“Offeror Transaction”), then Tsogo Sun Gaming or its successor-in-title within the Tsogo Group of
companies to Tsogo Sun Gaming’s voting and economic interest in SunWest and Worcester
(“Tsogo Shareholder”) may elect, by written notice given to Sun International within 30 days of the
announcement of the Offeror Transaction or of written notice of the Offeror Transaction being given
by Sun International to the Tsogo Shareholder (“Offer Announcement”), whichever is the earlier,
to put the interest held by the Tsogo Shareholder in SunWest and Worcester to Sun International,
in consideration for the issue of new ordinary shares in Sun International and/or for a cash
consideration, based on the aggregate value of the Tsogo Shareholder’s interest in SunWest and
Worcester. Sun International will determine the proportion of the consideration which will be settled
by the issue of new Sun International ordinary shares or in cash.
The aggregate value of the interest held by the Tsogo Shareholder in SunWest and Worcester will
be determined based on an EBITDA multiple of 7.5, where the EBITDA is determined based on the
last available financial information of SunWest and Worcester as published by Sun International.
The amount of the Tsogo Shareholder’s interest in SunWest and Worcester which it will be entitled
to put to Sun International will be limited to an interest having a value of not more than 29.99% of
Sun International’s market capitalisation at that time ("Capped Amount"), unless Sun International,
in its discretion, elects to obtain the requisite shareholder approval for acquisition of the Tsogo
Shareholder’s interest in SunWest and Worcester pursuant to the exercise of the put option.
Failing such shareholder approval being obtained, the Tsogo Shareholder will only be entitled to put
to Sun International so much of its interest in SunWest and Worcester as is equal to the Capped
Amount and will retain the balance of its interest.
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In the event that Sun International new ordinary shares are to be issued in settlement of the
consideration then the 5-day volume weighted average price at which Sun International ordinary
shares trade on the exchange operated by the JSE Limited (“JSE”) following the Offer
Announcement will apply.
5. Condition precedent to the Proposed Transaction
The Proposed Transaction is subject to the fulfilment (or waiver) by 30 April 2016 (or such later date or
dates as the parties to the Transaction Agreement may agree) of the condition precedent that the trustees
of SIEST shall have, inter alia (i) waived, consented to and/or approved of the sales of shares in SunWest
and Worcester by the Sun International Sellers and the GPI Sellers in terms of the Proposed Transaction
and (ii) waived its pre-emptive or other similar rights which it may have in respect of the further transfers
of shares in SunWest and Worcester as contemplated in the Transaction Agreement.
6. Financial effects of the Proposed Transaction
The 20% proportional aggregate net asset value of SunWest and Worcester attributable to Tsogo is R65.6
million as at 31 December 2015.
For the six months ended 31 December 2015, SunWest and Worcester achieved an aggregate profit after
tax of R256.3 million of which Tsogo’s 20% interest would have been R51.3 million.
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
4 April 2016
Investment bank and transaction sponsor Sponsor
Investec Bank Limited Deutsche Securities (SA) Proprietary Limited
Corporate law adviser Competition law adviser
Mervyn Taback Incorporated Nortons Inc
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