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GRAND PARADE INVESTMENTS LIMITED - The proposed partial disposal of shareholdings in Sunwest and Worcester

Release Date: 04/04/2016 17:05
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The proposed partial disposal of shareholdings in Sunwest and Worcester

GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
(“GPI”)

PROPOSED PARTIAL DISPOSAL OF SHAREHOLDINGS IN SUNWEST INTERNATIONAL
PROPRIETARY LIMITED AND WORCESTER CASINO PROPRIETARY LIMITED
AND CAUTIONARY ANNOUNCEMENT

1.   Introduction
     Terms have been agreed between Grand Parade Investments Limited (“GPI”), Sun International
     Limited (“SIL”) and Tsogo Sun Gaming Proprietary Limited (“Tsogo”) regarding a proposed disposal by
     GPI and SIL of a 10% interest each in SunWest International Proprietary Limited (“SunWest”)(in the case
     of GPI a 10% economic interest and 19.96% voting interest) and a 10% interest each in Worcester
     Casino Proprietary Limited (“Worcester”) to Tsogo (“Proposed Transaction”).

2.   Background to SunWest and Worcester
     SunWest and Worcester have casino and hotel operations in the Western Cape. SunWest’s primary
     assets consist of the GrandWest Casino and Entertainment World and the Table Bay Hotel in Cape
     Town situated on the historic Victoria & Alfred Waterfront. Worcester operates the casino, hotel and
     ancillary leisure and entertainment business in respect of the Golden Valley Casino at Worcester in the
     Breede River Valley.

     GPI holds an economic interest of 25.1% in each of SunWest and Worcester.

3.   Salient Terms of the Proposed Transaction
     The Proposed Transaction entails GPI disposing of a 10% economic interest and 19.96% voting interest in
     SunWest and 10% economic and voting interest in Worcester for a purchase consideration of R675
     million (“Purchase Consideration”) (“GPI Disposal”). The Purchase Consideration is calculated based on
     the aggregate of the forecast EBITDA (excluding rentals) for both of SunWest and Worcester for the
     financial year ended 30 June 2016 and the aggregate of the forecast net debt of both the companies
     as at 30 June 2016. In the event that the actual EBITDA (excluding rentals) is less than R975 million at
     30 June 2016, then a downward adjustment will be made to the Purchase Consideration. The Purchase
     Consideration will also be adjusted by any variation from the forecast net debt. Tsogo will settle the
     Purchase Consideration through an initial payment of R37.5 million followed by the payment of 17
     monthly installments of R37.5 million each (unless adjusted per the aforegoing), with the monthly
     instalments commencing in the month following the fulfillment of the conditions precedent to the
     Proposed Transaction (including specifically GPI shareholder approval), which conditions precedent
     are anticipated to be fulfilled by 30 June 2016.

     The Proposed Transaction also entails SIL disposing of a 10% interest in SunWest and Worcester on the
     same conditions as the GPI Disposal (“Sun Disposal”). The Sun Disposal is conditional upon receipt of
     confirmation from the Sun International Employee Share Trust (“SIEST”), by not later than 30 April 2016
     that it has waived its pre-emptive rights in terms of the current shareholders agreement. SIEST has a right
     to increase its current shareholding in SunWest from 3.3% to 3.5%. The condition is anticipated to be
     fulfilled by 30 April 2016.
     
     Should the GPI sale not obtain the necessary Shareholder approvals, GPI will continue to operate on
     the current status quo.

     The Proposed Transaction will not result in a change of control in respect of SunWest and Worcester.
     Following the implementation of the Proposed Transaction, the effective voting and economic
     shareholding of SunWest and Worcester will be as follows:

                                                                 SunWest                       Worcester
                                                        SIL and GPI Sell 10% Each      SIL an GPI Sell 10% Each
                                                          Voting         Economic       Voting         Economic
     SIL                                                      50.05%          61.60%        61.40%          61.40%
     GPI                                                      29.93%          15.10%        15.10%          15.10%
     Sun International Employee Share Trust ("SIEST")          0.01%           3.30%         3.50%          3.50%
     Tsogo                                                    20.00%          20.00%        20.00%          20.00%
     Total                                                      100%           100%           100%           100%


     Tsogo’s investment in SunWest and Worcester will be that of a passive investor and Tsogo will therefore
     have no:
     -   representation on the board of directors of either SunWest or Worcester;
     -   operational involvement in SunWest and Worcester; or
     -   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.

     Sun International Management Limited will continue to manage SunWest and Worcester under its
     existing management contract on the same terms and conditions.

4.   Rationale and Use of Proceeds
     The Proposed Transaction will realise significant value for GPI shareholders and represents an excellent
     return on investment. GPI has been invested in SunWest and Worcester, as SIL’s initial BEE partner, for 17
     years, but believes that the timing and terms of the Proposed Transaction support GPI’s strategy to
     pursue new investment opportunities in the food industry as well as to reduce debt obligations in GPI.
     Importantly, SIL and Tsogo have the necessary financial capability, requisite BEE credentials, regulatory
     and industry knowledge to implement the Proposed Transaction at a valuation that meets GPI’s
     expectations.

     GPI has identified a number of advantages to the Proposed Transaction, which include the following:
     -   compelling valuation and returns;
     -   the anticipated proceeds place GPI in a strong cash position with the flexibility to either invest in its
         existing food related assets and to pursue new investment opportunities within the food and its
         related industries; and
     -   GPI will be in a position to reduce its debt obligations from the current levels, which are at the
         upper end of its target debt equity range of between 20.0% and 35.0%, to its preferred target debt
         equity level of 20.0%.

5.   Conditions Precedent
     The GPI Disposal is conditional on the following conditions precedent (“Conditions Precedent”):
     -   GPI obtaining its shareholder approval by 30 June 2016; and
     -   GPI securing the release of its shares in SunWest that are currently subject to security arrangements
         with The Standard Bank of South Africa and Nedbank Limited.

6.   Effective date of the Proposed Transaction
     The effective date will be the closing date of the Proposed Transaction, being the first day following the
     month in which the Conditions Precedent have been fulfilled (envisaged for 1 July 2016).

7.   Unaudited Pro Forma Financial Effects of the GPI Disposal
     As at the date of this announcement, the pro forma financial effects of the Proposed Transaction in
     relation to GPI has not yet been finalised and shareholders are hereby advised that the pro forma
     financial information will be announced in due course.

8.   Categorisation
     In terms of the Listings Requirements of the JSE, as the value of the Proposed Transaction, insofar as it
     relates to GPI, exceeds 30% of GPI’s market capitalisation, it meets the definition of a category 1
     transaction as contemplated in terms of section 9 of the Listings Requirements of the JSE. As a result, a
     general meeting of GPI shareholders will be convened and an ordinary resolution in respect of the
     Proposed Transaction will be required to be approved by GPI shareholders at the general meeting.

9.   Circular
     A circular containing the full details of the Proposed Transaction, incorporating a notice convening the
     required GPI general meeting will be posted to shareholders on or around 30 May 2016 and the date of
     the general meeting will be announced on SENS once the circular is posted.

10.  Cautionary
     GPI shareholders are advised that, due to the fact that the pro forma financial effects of the Proposed
     Transaction have not yet been announced, to exercise caution when dealing in their securities until
     such time as the pro forma financial information of the aforementioned transactions have been
     announced.

Cape Town
4 April 2016

Legal Advisor to GPI
Bernadt Vukic Potash & Getz

Sponsor & Transaction Advisor
PSG Capital

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