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Proposed merger and withdrawal of cautionary
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 MERGER BETWEEN SUN DREAMS S.A. (“SUN DREAMS”) AND CERTAIN GAMING ASSETS OF CLAIRVEST
CHILE LIMITADA (“CLAIRVEST”) AND INVERSIONES SAN ANDRES LIMITADA (“VALMAR”) (COLLECTIVELY
“MARINA”) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the Stock Exchange News Service (“SENS”) announcement released on the
Johannesburg Stock Exchange (“JSE”) on 30 April 2019 when shareholders were advised that Nueva
Inversiones Pacifico Sur Limitada (“Pacifico”) had made an offer, which the Company has accepted, to acquire
14.94% of Sun International’s shareholding in Sun Dreams, which would result in each party holding a 50%
equity interest in Sun Dreams.
Sun International and Pacifico’s strategic intent is to build a casino and hospitality group with critical mass in
Latin America (“Latam”), which can capitalise and develop future business opportunities in South America,
Mexico and the United States of America while at the same time, mitigating future challenges and risks to the
business and concentration of assets in any one country in Latam.
In order to capitalise on these growth opportunities in Latam and elsewhere, Sun International and Pacifico
(collectively the “Sun Dreams shareholders”) have entered into a binding Memorandum of Understanding,
incorporating a term sheet (“MOU”), with Clairvest and Valmar (“the Marina shareholders”), which subject
to certain suspensive conditions being fulfilled, or where applicable waived, will result in a merger (the
“Proposed Merger”), between Sun Dreams and Marina (“the Merged Entity”).
In addition, the Sun Dreams shareholders and the Marina shareholders (collectively “the parties”), have
agreed that once the Proposed Merger has been consummated, they will consider an Initial Public Offering
(“IPO”) of Sun Dreams, on the Santiago Stock Exchange in the near future, in order to further unlock the
strategic intent highlighted above.
2. BACKGROUND TO MARINA
2.1. Clairvest
Founded in 1987, Clairvest is a Toronto-based private equity management firm with over Canadian
$2.0 billion of equity capital under management. Clairvest manages its own capital and that of third
parties, through the Clairvest Equity Partners Limited partnerships and one of its primary areas of focus
is the gaming industry.
2.2. Valmar
Valmar is a real estate family company founded in 1969, which has been involved in the development
of housing and neighborhoods in Concepcion, the second largest city in Chile, for the past 50 years.
Valmar Invests in and develops construction solutions for the Chilean market, which has included joint
ventures and many other construction and real estate companies in the past.
During the last 15 years, Valmar has expanded into different businesses such as IT, agriculture and
forestry, although its main business remains real estate. In the last 10 years, Valmar has also
significantly invested in casinos and hospitals and manages in excess of US$500 million in assets in
total.
2.3. The Marina portfolio of properties comprises of:
FOOD AND
CASINO HOTEL BEVERAGE
OUTLETS
PROPERTY
Convention
Slot Table SPA
Rooms Centre
machines games sqm
Delegates
CHILE
600 hotel
Talcahuano 1385 50 120 800 conference 800 16
centre
Calama 485 21 148 600 650 9
Osorno 400 21 - - - 6
400 hotel
Chillán 450 20 100 1500 conference 730 11
centre
Total 2,720 112 368 3,900 2,180 42
3. RATIONALE FOR THE PROPOSED MERGER
Over the past years, Sun Dreams has assembled an attractive portfolio of assets, which forms the basis to
leverage its growth strategy in the region. Sun Dreams believes that in order to achieve further critical mass
in Latam, the company needs to make acquisitions or merge its assets with another meaningful player in the
region. In addition to expediting its growth strategy, a merger also mitigates risks to the business by
diversifying its asset base.
The Proposed Merger strengthens Sun Dreams’ position in Latam and affords Sun Dreams the opportunity to
partner with Clairvest, which are experienced investors in casino assets. In addition, Clairvest will bring a
wealth of experience and add value to the Merged Entity by growing the business.
The Proposed Merger results in the creation of one of Latam’s largest gaming groups, which will have the
profile, critical mass and balance sheet to expand throughout the rest of the continent, make meaningful
acquisitions and take on larger projects. The Merged Entity will be structured with a relatively low level of
gearing which will ensure that it is self-sustaining. The Proposed Merger should also unlock synergies between
the combined Chilean properties as a result of its scale.
4. NET ASSET VALUE OF AND PROFITS ATTRIBUTABLE TO SUN DREAMS, MARINA AND BASIS OF VALUATION
OF MERGED ENTITY
For the year ended 31 December 2018, the Revenue, EBITDA and operating profit of the merging parties was
as follows:
US$ million Sun Dreams Marina
Revenue 388 114
EBITDA 99 33
Profit after tax 19 14
The above trading excludes Chillán (Marina asset) which has not yet commenced trading.
The book net asset value of the shareholding held by Sun International in Sun Dreams as at 31 December
2018 (being the date of the most recent published financial results), was US$260 million.
The merger ratio in respect of the Proposed Merger has been based on a valuation of the Merged Entity taking
into account the applicable EBITDA’s, term of licences, country factors, other assets and net debt. Based on
the valuation, the Proposed Merger will result in Sun International holding approximately 31% of the Merged
Entity, which reflects the full value of its investment prior to the Proposed Merger. This shareholding is
calculated taking into account the disposal of Sun International’s 14.94% equity interest in Sun Dreams to
Pacifico.
In addition, and in order to align the equity interests, based on the enterprise merger ratio (i.e. before net
debt), Sun International will have the option (for a period of 10 days following the merger) to acquire
additional shares to increase its shareholding to 32% of the Merged Entity from the Marina shareholders. Sun
International will therefore have a meaningful interest in the business that has strong growth potential and
will actively participate in the growth strategy of the Merged Entity.
The merger valuation may be adjusted by the parties following the Proposed Merger in accordance with the
valuation true-up provisions contained in the binding MOU. Further details in this regard are set out in
paragraph 5 below and will be contained in the circular to be posted to shareholders.
5. SALIENT TERMS OF THE PROPOSED MERGER
The salient terms and conditions of the Proposed Merger, as set out in the MOU entered into between the
parties, are as follows:-
• both the parties will combine their businesses in Latam to form the Merged Entity that will own and
operate, 11 Chilean casino licences and associated assets, 8 Peruvian casino operations and associated
assets, an Argentinian casino licence and 60% of a Colombian licence;
• the valuation of Iquique (Sun Dreams asset) and Chillán (Marina asset) are subject to an adjustment
based on the actual EBITDA achieved by these assets for the 12 month period starting 12 months
following the official opening of new properties and the audited actual cost of construction of the new
properties. Any adjustment will be settled between the parties as a price adjustment payable in shares
of the Merged Entity;
• the Merged Entity will for the time being continue to be managed by the existing senior management
team of Sun Dreams and will be the sole vehicle through which the parties develop their gaming
business in South America;
• a right of pre-emption will exist between the parties in order to retain their ownership percentages in
the Merged Entity and no party will be entitled to dispose of their equity interest in the Merged Entity
for a period of 12 months following an IPO of Sun Dreams;
• the Proposed Merger will be subject to standard restraints, warranties and indemnities and minority
protection clauses associated with transactions of this nature, as well as the fulfilment (or where
applicable waiver) of the suspensive conditions set out in this announcement and more fully described
in the MOU; and
• the Proposed Merger will be governed by and interpreted according to the laws of Chile.
6. EFFECTIVE DATE OF THE PROPOSED MERGER
The Proposed Merger will become effective on the date of fulfilment, or where applicable waiver, of the last
of the suspensive conditions set out hereunder and in the MOU.
7. SUSPENSIVE CONDITIONS TO THE PROPOSED MERGER
The Proposed Merger is subject to the fulfilment (or where applicable waiver) of the following suspensive
conditions:-
• the approval of the boards of directors and shareholders of the parties, as applicable, pertaining to
the conclusion of the Proposed Merger and the entering into of definitive agreements containing
terms and conditions substantially similar to those contained in the MOU;
• the parties conclude a due diligence exercise, the outcome of which is satisfactory to the parties;
• the lenders of the parties agree to waive the acceleration of any loans granted to these parties or the
parties have secured finance, which shall allow them to repay those loans;
• no material adverse effect equal to or greater than US$50 million shall have occurred to, among
others, the business, operations, assets, prospects or results of any of the parties; and
• the obtaining of all regulatory and other third party approvals pertaining to the Proposed Merger,
including but not limited to the relevant gambling board and stock exchange approvals.
8. CATEGORISATION OF THE PROPOSED MERGER AND SHAREHOLDER APPROVAL
In terms of the JSE Listings Requirements, the Proposed Merger is classified as a Category 1 transaction and
will require Sun International shareholder approval. Accordingly, a circular to shareholders will be posted
within 60 days of the date of this announcement containing, among others, a notice of general meeting.
9. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 30 April 2019 and are advised that as the
discussions and negotiations with the Marina shareholders have culminated in the entering into of a binding
MOU regarding the Proposed Merger, caution is no longer required to be exercised by shareholders when
dealing in the Company’s securities.
By order of the board of the Company
Sandton
24 May 2019
Financial Advisor and Sponsor to Sun International
INVESTEC BANK
Date: 24/05/2019 04:16:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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