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Proposed acquisition by Sun International of 50% of EDS’s equity interest in Sun Dreams
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 ACQUISITION BY SUN INTERNATIONAL OF 50% OF EDS’s EQUITY INTEREST IN SUN DREAMS
INTRODUCTION
On 29 May 2017, Sun International acting through its subsidiary Sun Latam SpA, (“Sun Latam”),
Entretenimientos Del Sur Limitada (“EDS”) ( a member of The Rohatyn Group) and Nueva Inversiones
Pacifico Sur Limitada (“Pacifico”) (collectively referred to as “the parties”) entered into and concluded a
share purchase agreement (“the SPA”), whereby Sun Latam and Pacifico each agreed to acquire 50% of
EDS’s equity interest in Sun Dreams Sociedad Anonima (“Sun Dreams”) on terms and conditions more
fully set out in the Agreement and as summarized below (“the proposed Acquisition”).
The salient terms and conditions of the proposed Acquisition as set out in the SPA are as follows:-
- Sun Latam has agreed to acquire 1 289 277 (9.813%) ordinary shares of zero par value each, owned
by EDS in the issued share capital of Sun Dreams ;
- the closing date of the proposed Acquisition shall be the fifth business day after the date on which
the suspensive conditions set out hereunder have been fulfilled (or where appropriate waived);
- as part of the proposed Acquisition the put option previously exercisable by EDS on Sun
International as set out in the merger agreement approved by shareholders in 2015 (“the merger
agreement”), will fall away;
- the proposed Acquisition will be subject to the standard warranties and indemnities associated with
transactions of this nature as well as the fulfillment (or where appropriate waiver) of the suspensive
conditions more fully set out in this announcement;
- any disputes between the parties will be resolved by arbitration in accordance with the Rules of the
International Chamber of Commerce in Santiago , Chile; and
- the proposed Acquisition and the SPA will be governed by and interpreted according to the laws of
Chile.
Furthermore, certain members of Sun Dreams’ senior management, who collectively hold 75 738
(0.565%) ordinary shares of zero par value each in Sun Dreams issued share capital have exercised their
tag-along rights in terms of the stock option agreements concluded in 2013 and as a result thereof Sun
Latam and Pacifico will each acquire 50% of the senior managements’ equity interests in Sun Dreams.
The shareholdings of the parties pre- and post the conclusion of the proposed Acquisition will be as
follows:
Before After
Sun Latam 55,0% 64,9%
Pacifico 25,1% 35,1%
EDS 19,3%
Management 0,6%
100,0% 100,0%
NATURE OF BUSINESS OF SUN INTERNATIONAL
Sun International is a public listed company which is a leader in the gaming and hospitality industry in
South Africa as well as in various countries in Central and South America, which include Chile, Colombia,
Peru and Panama.
The Company operates a number of casinos, hotels, as well as entertainment plus food and beverage
facilities through its subsidiaries in South Africa, Africa and Latin America.
RATIONALE FOR THE PROPOSED ACQUISITION
In recent years, the Company has publically declared its intentions of growing its gaming and hospitality
businesses not only locally in South Africa but also internationally in Latin America.
As part of the merger agreement concluded between the parties in 2015, both EDS and Pacifico were
granted various put options against Sun International to dispose of their shareholdings in Sun Dreams.
The full details pertaining to the put options which were approved by shareholders at the general meeting
which was held on 2 November 2015, were contained in the circular to shareholders dated 30 September
2015.
During March 2017, EDS provided written notification to Sun International that it believed that market
conditions in Chile were appropriate to proceed with an IPO of Sun Dreams and that it wished to dispose
of its shareholding in Sun Dreams. As an alternative to proceeding to an IPO, Sun International entered
into discussions and negotiations with EDS whereby the Company offered to acquire EDS’s shareholding
in Sun Dreams. At the same time, Pacifico approached Sun International and indicated that it too was
interested in acquiring a portion of EDS’s shareholding in Sun Dreams as opposed to exercising its put
option against the Company, as per the merger agreement. Following further discussions and negotiations
held with Pacifico, the parties have agreed that Sun International will acquire 50 % of EDS’s shareholding
in Sun Dreams, while Pacifico will acquire the balance of EDS’s shareholding in Sun Dreams.
Pacifico has further agreed that it will waive its future put option against Sun International as contained
in the merger agreement, in consideration for being permitted to bring Sun Dreams to an IPO in future. If
for any reason attributed to Sun International, Sun Dreams does not consummate an IPO following a
request by Pacifico to do so, then Pacifico will have a right to trigger a valuation process and will have an
unconditional right to sell to Sun International all of its shares in Sun Dreams at the determined value.
Accordingly, the proposed Acquisition aside from increasing Sun International’s shareholding in Sun
Dreams to approximately 65% which is aligned with its strategic objective of increasing its interests in
Latin America, also eliminates the risks of having both EDS and Pacifico exercising their put options against
Sun International for their entire shareholdings in Sun Dreams, with the incumbent cash and debt
consequences which these would entail for the group.
Accordingly the Sun International board has deemed it prudent to proceed with the proposed Acquisition.
EFFECTIVE DATE OF THE PROPOSED ACQUISITION
The proposed Acquisition by Sun International, through its subsidiary, of 50% of the 19.625% shareholding
owned by EdS and 50% of the 0.565% shareholding owned by senior management in Sun Dreams, will
become effective on the fifth business day after the date of fulfilment (or where appropriate waiver) of
the suspensive conditions set out in the SPA concluded between the parties.
CONSIDERATION
The purchase price payable by Sun International to EDS and management to acquire 50% of their
respective shareholdings in Sun Dreams, shall be US$63 040 491 (“the Acquisition Consideration”).
NET ASSET VALUE OF AND PROFITS ATTRIBUTABLE TO SUN INTERNATIONAL
The book net asset value of the shareholdings held by EDS and senior management in Sun Dreams to be
acquired by Sun International, as at 31 December 2016 (being the date of the most recent published
financial results of Sun International) amounted to R473 million.
For the year ended 31 December 2016, Sun International generated revenue of R 7 670 million, EBITDA
of R 1 900 million and profit after tax of R 489 million.
SUSPENSIVE CONDITIONS TO THE PROPOSED ACQUISITION
The proposed Acquisition is subject to the obtaining of all regulatory approvals (to the extent that the
same may be required or waived) pertaining to the proposed Acquisition, in Chile and Panama, including
but not limited to the relevant gambling board approvals.
FUNDING OF THE PROPOSED ACQUISITION
The Acquisition Consideration to acquire 50% of EDS and senior managements’ equity interests in Sun
Dreams will be settled in cash, utilising funding to be secured from financial institutions in Chile.
CATEGORISATION OF THE PROPOSED ACQUISITION AND SHAREHOLDER APPROVAL
The proposed Acquisition is classified as a Category 2 transaction in terms of Section 9.15 of the JSE
Listings Requirements and accordingly will not require Sun International shareholder approval.
By order of the board of the Company
Sandton
30 May 2017
Sponsor to Sun International
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
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