The hotel and casino operator will use the $160 million from the sale of Sun Dreams to extinguish offshore debt in Latin America and reduce local gearing.
Sun International plans to sell its remaining stake in Sun Dreams after settling a dispute with its joint-venture partner in the Latin American casino business. It will use the proceeds to reduce its debt.
The deal ends a tussle between Chile-based subsidiary Sun Latam and Nueva Inversiones Pacifico Sur Limitada (Pacifico) after the latter failed to follow through on a transaction struck in April last year to acquire an additional 14.94% interest in Sun Dreams for $85.8 million (R1.5 billion), which would have made the two companies equal partners in the business.
In June, Sun International shunned an offer by Pacifico to buy 50.1% of its stock at R22 per share and said it was headed for the International Chamber of Commerce if it didn’t honour the previous deal. The offer came as Sun International prepared for a R1.2 billion rights offer to help support its operations due to the impact of Covid-19 and lockdown that had affected its operations globally.
Sun International said Pacifico had now agreed to buy the 14.94% for $60 million and would pay a further $100 million for Sun Latam’s remaining 50% stake, subject to the approval of Sun International shareholders and Chilean casino regulator Superintendencia de Casinos de Juego (SCJ). The initial $60 million would be used to settle and extinguish offshore debt in Latam of $38.3 million with the balance being repatriated back to SA. Sun International would also receive up to $53 million in future earnouts linked to the renewal of casino licences and the achievement of future profit hurdles.
With Pacifico looking to increase its interest in Sun Dreams and the challenges the group faced, Sun International said the transaction presented the opportunity to exit its investment in Sun Dreams at an attractive historical multiple given the circumstances with the potential for further earnout payments.
The Covid-19 pandemic has had a major impact on the group’s operations both in South Africa and Latam,” Sun International said. “Although Sun Dreams has an attractive portfolio of assets and a number of opportunities for growth, it is, at the same time, facing several challenges, including the need to renew its SCJ casino licences, political and social reforms in Chile and the need to secure funding for its Iquique (new casino) project.”
Main Image: INCEConnect
