Tsogo Sun in R23 billion HPF deal

CAPE TOWN – South Africa’s largest hotel and casino operator, Tsogo Sun, has sold seven of its casino and hotel businesses to Hospitality Property Fund (HPF) in a shares-and-subscription deal worth R23 billion.

In a statement released by Tsogo Sun on the Stock Exchange News Service yesterday the hotel operator said that the transaction was in line with the board’s strategy to restructure Tsogo Sun into three separate and distinct operating divisions, being a property division, a gaming division and a hotel management division.
“The board anticipates that the separation of Tsogo Sun into these three focused divisions – and separate listed entities – will unlock value and provide greater investment choice for Tsogo Sun shareholders. “On conclusion of the transaction, Hospitality is expected to own investment properties with a total fair market value of about R36bn,” the company said in the statement.
Tsogo said upon completion of the transaction, it would hold about 87 percent of the shares in HPF. “It is Tsogo’s ultimate intention to unbundle their shareholding in Hospitality to its shareholders and has warranted to Hospitality to do so at a time and in a manner that does not have any adverse consequences to Hospitality,” it said.
Tsogo said that it had appointed PSG Capital as the independent expert to make the appropriate recommendations in the form of a fairness opinion as required in terms of the JSE Listings Requirements. “The independent expert is in the process of finalising its opinion on the transaction, which opinion, together with the views of the board on the transaction will be detailed in the circular to be sent to Tsogo shareholders.
“Based on the initial assessment of the transaction, subject to the independent expert opinion, the board is supportive of the transaction,” it said.
Tsogo revealed earlier this year that its investment spending in the year to March had declined to about R3.25bn.
Those investments included the purchase of Gameco in exchange for shares and R1.7bn in cash, according to a report by Bloomberg.
The company said that its net debt had increased 4 percent to R12.5bn, compared with R3.58bn at the end of 2013, according to data.
Tsogo’s chief executive Jacques Booysen had also expressed the company’s intentions to expand further into Africa, with plans to open a Garden Court in Zambia, and a Southern Sun Hotel in Ghana. Tsogo shares ticked up 1.31 percent on the JSE yesterday to close at R20.92.
 
-BUSINESS REPORT