Tsogo Sun, Gold Reef to merge

2010-02-18 10:53

Johannesburg - Global brewing giant SABMiller [JSE:SAB] said on Thursday that it has agreed to merge Tsogo Sun, its South African hotels and gaming associate, with Gold Reef Resorts [JSE:GDF], the JSE listed business with premier gaming assets in five of South Africa's provinces, through an all-share merger.

The transaction will be effected through the acquisition by Gold Reef of the entire issued share capital of Tsogo Sun in exchange for the issue of new shares in Gold Reef.

SABMiller will exchange its 49% interest in Tsogo Sun for a 39.7% interest in the enlarged Gold Reef/Tsogo Sun business, which will continue to be listed on the JSE with an expected market capitalisation of approximately R21bn - or around $2.7bn.

It is estimated that the enlarged group will be the 36th largest company on the JSE, and the largest hotel and gaming company amongst its listed EMEA peers by market capitalisation as at Friday 29 January 2010.

Tsogo Sun is a hotel, gaming and entertainment company with operations throughout Africa, the Middle East and the Seychelles. Tsogo Sun has interests in gaming resorts in South Africa, including Montecasino, Suncoast Casino and Entertainment World, The Ridge Casino, Emnotweni Casino, Hemmingways Casino, Caledon Casino and Century Casino.

Tsogo Sun also owns the Southern Sun hotels group, which is one of the largest hotel groups in South Africa and is also one of the largest timeshare operators in South Africa. By the end of 2010, the Tsogo Sun Group expects to operate 90 hotels with 14 438 rooms in 9 countries across Africa and the Middle East.

Gold Reef operates resorts and entertainment complexes throughout South Africa, with an interest in the Gold Reef City Casino and Theme Park, Silverstar Casino, Golden Horse Casino, Goldfields Casino, Garden Route Casino, Mykonos Casino and Queens Casino.

The merger will create not only a premier gaming and hotels company in South Africa but a business of significant scale ranking amongst the largest listed gaming groups in the EMEA area (Europe, Middle East and Africa), SABMIller said.

The enlarged business will have an improved ability to attract new talent and resources and to capture opportunities that present themselves in the local and international gaming and hotel sectors, both in terms of organic growth and acquisition.

SABMiller will benefit from the diversification of the enlarged group's earnings, geographies and market segments through exposure to a more diversified portfolio of assets and income streams.

The enlarged group will be well positioned to benefit from improving economic conditions and increasing consumer spending across various regions in South Africa, and from improved access to additional sources of capital, including a greater presence and profile in the equity markets, and the South African bank loan and debt capital markets.

A strengthened balance sheet with low debt levels and high cash generation, along with the benefits of diversification, will also facilitate further growth.

Commenting on the transaction, SABMiller Chief Executive Graham Mackay said: "In 2002, we facilitated a landmark Black Economic Empowerment transaction by transferring our existing gaming and hotel assets into Tsogo Sun.

"We have been very satisfied with the development of our partnership with Tsogo Investments since then, and we are very pleased today to see it enter a new phase with this value accretive transaction, which has our full support."

Completion of the merger is subject to customary conditions precedent.

- I-Net Bridge