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South Africa – Sun Signs major deal with Minor

By - 12 September 2014

Minor International (MINT) and Sun International have agreed terms whereby Sun International is disposing a significant portion of its shareholdings and interest in its Botswana, Lesotho, Namibia, Swaziland and Zambia operations, consisting of eight properties to MINT for a total consideration of R679.5m (US$63.9m).

Sun International and MINT have also formed a new strategic partnership to own and operate the African Assets going forward. The Partnership intends to leverage both companies’ core strengths where Sun International will continue to manage the casino operations, while MINT will assume the hotel management, marketing and distribution under MINT’s Anantara and AVANI brands.

Sun International will dispose of 50 per cent of its interest in Zambia, and 80 per cent of its interests in Botswana, Namibia, Lesotho, and Swaziland. As a result, MINT’s effective shareholding will be 50 per cent in Zambia properties, which include 173-key Royal Livingstone and 212-key Zambezi Sun; 64 per cent in 196-key Gaborone Sun in Botswana; 80 per cent in 173-key Kalahari Sands in Namibia; 37.5 per cent in Lesotho properties, which include 158-key Lesotho Sun and 105-key Maseru Sun, and (5) 40.5 per cent in Swaziland properties, which are 149-key Royal Swazi and 202-key Ezulwini Sun.

The proposed transaction and the partnership with MINT in Africa are in line with Sun International’s strategy to optimise its capital allocation and resources. The Partnership enables Sun International to remain invested in the African Assets but with responsibility for the casino component only, as well as to partner with MINT in other African opportunities that have a casino Element. Going forward Sun International will be able to give greater focus to opportunities identified in Latin America and Asia (where MINT has a strong presence) as further key growth markets for its core casino business. In addition, MINT will commit its pro rata share of new capital expenditure to realize the revenue potential of the African Assets, thus giving Sun International more room to consider capital investment opportunities elsewhere.

Sun International will use proceeds from the disposal to reduce its debt and provide capacity for its strategic expansion initiatives.

The proposed transaction allows MINT to invest and operate in Botswana, Lesotho, Namibia, Swaziland and Zambia, where MINT believes in secular demand growth for quality accommodation. In addition, MINT will bring its hospitality expertise, together with operational and distribution capabilities, to capture the growth potential of the African Assets. The proposed transaction also fits with MINT’s expansion plans in Africa, where MINT currently owns eight luxury game lodges and resorts in Kenya and Tanzania under the Elewana Collection, and five hotel projects in Mozambique under MINT’s Anantara and AVANI brands.

The only African property outside of South Africa owned by Sun International and not part of the Proposed Transaction is the Federal Palace in Lagos, Nigeria, in which Sun International and MINT are in discussion regarding a possible investment by MINT.

Sun International Chief Executive Graeme Stephens said: “The Proposed Transaction provides an opportunity for Sun International to create a strategic alliance with MINT, a leading hospitality and leisure operator that brings not only hotel management and marketing expertise but also an ability and desire to invest in the assets under its management. With MINT now taking the bulk of management responsibility for the African Assets, the proposed transaction allows Sun International and its management team to increase their focus on the core casino assets that are driving its financial performance and strategy. In addition, Sun International will remain invested in the Partnership and will continue to benefit in the future growth of these African Assets under the new alliance with MINT.”

William Heinecke, Chairman and Group CEO of MINT added: “Over the past few years, MINT has strategically expanded its hospitality business into many regions, and Africa is one of the continents that MINT saw substantial growth potential and has put its focus on, as evidenced by a number of acquisitions and partnerships in the region. MINT is excited by this latest acquisition which will augment its growth strategy in Africa and will further introduce our Anantara and AVANI brands in the region. We look forward to seeing our partnership with Sun International further flourish in the future”.

Dillip Rajakarier Chief Executive Officer of the Minor Hotel Group added: “Starting with the existing African Assets, it is the intention of the Partnership to explore together other hotel and gaming opportunities that may arise in Africa and Asia, where MINT would manage the hotel component and Sun International would manage the casino component”.

The only African property outside of South Africa owned by Sun International and not part of the Proposed Transaction is the Federal Palace in Lagos, Nigeria, in which Sun International and MINT are in discussion regarding a possible investment by MINT.

The transaction requires, inter alia, the finalisation of certain transaction documents and obtaining of regulatory approvals in the various jurisdictions in which the African Assets are located. The sale and purchase agreements for each of the African Assets are inter-conditional as the African Assets are being sold as a portfolio.

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