ACQUISITION

Sun International to buy Peermont

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Sun International has announced that agreements had been concluded between Sun International and the holders of ordinary shares, preference shares and mezzanine debt in the Peermont Group, in terms of which Sun International will acquire 100% of the Peermont Group.

In addition, Sun International and Peermont have reached agreement to settle the objection by Peermont to Sun International’s Menlyn Maine project in Tshwane. Peermont operates a portfolio of gaming and hospitality businesses in South Africa and Botswana, owning nine casino resorts, including its flagship Emperors Palace casino resort, three stand-alone hotels and one stand-alone casino.

Sun International CE Graeme Stephens said: “Peermont has a number of complementary attributes that will enhance our group. These include the fact that Peermont has established and well-maintained assets and infrastructure, particularly Emperors Palace, which also has extensive hotel and conference facilities. Their portfolio also has high EBITDA margins in excess of 37%, and an experienced and highly regarded management team.”

The acquisition will be subject to approvals, including the relevant regulatory bodies and the approval of the requisite majority of Sun International shareholders. In this regard, the major shareholders have already been approached and have indicated their support for the transaction.

The acquisition provides Sun International with an opportunity to increase gaming revenue from Gauteng, which is the provincial jurisdiction with the highest gambling spend in South Africa. Emperors Palace is one of the largest casinos in South Africa with an attractive financial and operating profile. The property has an EBITDAM margin (i.e. pre—management fees) in excess of 41%, which is well above the average of Sun International. As a result of the Proposed Transaction, Sun International’s portfolio of South African assets will be further diversified. This diversification has the effect of reducing Sun International’s reliance on its GrandWest property in the Western Cape, which currently represents 27% of the Group’s EBITDA.

Said Stephens: “Sun International remains committed to its strategy of diversifying the Group’s portfolio to increase exposure to offshore opportunities, in particular Latin America. While the Peermont portfolio of assets will initially increase the proportion of the combined business that arises in Southern Africa, it also opens the possibility of further restructuring of local assets, with a medium term objective of creating a portfolio of fewer, larger, quality assets.” Fulfillment of the regulatory conditions precedent may take between 9 to 12 months, during which time Sun International will explore the possibility of disposing of certain of the smaller assets within the Peermont portfolio.

Peermont Group CEO Anthony Puttergill said: “The proposed transaction is a positive development for Peermont and supports the momentum that we have built during the past few years. We believe that a number of strong growth opportunities can be unlocked by being part of a larger and well-resourced Group.”

 

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