Sun International reduces African asset stake

Johannesburg - Sun International [JSE:SUI] has entered into agreements with Minor International Public Company ("Mint") whereby Sun International will dispose of a significant portion of its interests in the African assets to a foreign subsidiary of Mint.

The investment by Mint will be a combination of an acquisition of existing shares from the relevant Sun International subsidiaries and the acquisition of an interest in the operating management agreements whereby Sun International management provides management and related services in respect of each of the African assets.

Mint will also commit to invest into those operations that require refurbishment in the short to medium term.

The assets involved include the Gaborone Sun in Botswana, the Kalahari Sands in Namibia, the Lesotho Sun and Maseru Sun in Lesotho, the Royal Swazi and Ezulwini Sun in Swaziland and the Royal Livingstone and Zambezi Sun in Zambia.

Sun International will continue to manage the casino operations situated at each of the African assets and mint will assume day-to-day management responsibility for the hotel operations other than Zambia, which will be jointly managed under a joint venture arrangement.

The collective net purchase amounts to R664m plus the face value of any shareholder loans on the closing date.

The only African operation in which Sun International has an interest (excluding its South African operations) and which does not currently form part of the proposed transaction, is its investment in the Tourist Company of Nigeria (TCN) the owner of the Federal Palace in Lagos.

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 company said on Monday.

The proposed transaction 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.

In addition, Mint will commit its pro rata share of new capital expenditure to realise the revenue potential of the African assets, thus giving Sun International more room to consider capital investment opportunities elsewhere.

"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," the company said.

"Given that Mint does not operate or manage casinos - and has no intention to - there is the basis for a natural partnership of complementary skills and strategy."

The Proposed Transaction provides an opportunity for Sun International to create a strategic alliance with a leading international hospitality and leisure operator that brings not only hotel management and marketing expertise but also an ability and desire to invest into the assets under its management.

Starting with the existing African assets, it is the intention of the alliance to explore other hotel and gaming opportunities in particular those that may arise in Africa and Asia, where Mint would manage the hotel component and Sun International would manage the casino component.

"In addition to the strategic rationale above, 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 those properties in its existing portfolio that are driving the group's financial performance and strategy," the company said.

The sale proceeds from the Proposed Transaction will be used to reduce group debt and provide capacity for the expansion initiatives of Sun International.

Sun International will remain as a minority shareholder and partner in the African assets, other than Zambia where it retains a 50% interest, and will continue to benefit in the future growth of these assets.

Mint is a global company focused on three primary businesses including hotels, restaurants and lifestyle brands distribution.

The shares of Mint are listed on the Stock Exchange of Thailand. Its current market capitalisation is more than $4.1bn. In 2013 Mint generated in excess of $1.1bn in revenues and net profit of over $130m.

Mint is a hotel owner, operator and investor with a portfolio of 110 hotels and serviced suites under the Anantara, Avani, Oaks, Per Aquum Elewana, Four Seasons, St Regis, Marriott, Radisson Blu and Minor International brands.

Mint's hotel portfolio includes properties in Thailand, Australia, New Zealand, Maldives, Vietnam, the Middle East, Sri Lanka, China, Malaysia, Indonesia and Cambodia.

In Africa it has invested in game lodges and hotels in Tanzania, Kenya and Mozambique and the proposed transaction is a complementary fit to these assets.

Mint is one of Asia's largest restaurant companies with over 1 500 outlets in 20 countries. It is also one of Thailand's largest distributors of lifestyle brands such as Gap, Esprit and Tumi.

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