Sun International gets nod for Latin American merger

Johannesburg - Sun International [JSE:SUI] has been given the green light to merge its Latin American portfolio with the casino and hotel portfolio of assets of Chile-based leader in the gaming and entertainment industry, Dreams SA, the hotel and gaming group announced on Wednesday.

The share price climbed 1.12% on the news to trade at R73.36 by 11:45 on the JSE.

The merger came after Sun International shelved its R9.5bn plan to buy local rival casino owner Peermont Group in April.

The merger between Sun International’s Monticello Grand Casino in Chile, the Ocean Club Casino in Panama and the Sun Nao Casino in Colombia with those of Dreams has now been implemented and will result in the formation of the largest gaming company in Latin America, the group said in a statement.

Dreams' assets, like those of Sun International, include hotels, casinos, entertainment and food and beverage facilities.

The Dreams gaming portfolio includes six casinos in Chile (Iquique, Temuco, Valdivia, Puerto Varas, Coyhaique and Punta Arenas) and four in Peru (all in Lima). Together, the new company will have 13 casinos with a total of around 7 000 slot machines and 300 tables. 

Sun International CE Graeme Stephens described the deal as a milestone in the history of the company, saying it creates the opportunity to achieve scale and reach outside Africa and diversify its earnings and risk.

"To achieve critical mass in Latin America, we decided back in 2013 that we needed to make acquisitions or merge our assets with another meaningful player in the region.

"In addition to accelerating our growth strategy, this merger also diversifies Sun International’s concentration risk."

Stephens said Dreams provides a strong presence in Chile and, importantly, an executive management team that comes from Latin America and has significant operational experience in the region.

Dreams' expansion strategy has seen growth in Peru which is complementary to Sun International’s expansion into Panama and Colombia, he added.

“Latin America holds tremendous potential and plans are well advanced to expand further in the region. We are already investigating exciting opportunities in Brazil which is now opening to gambling, and have plans for expansion in Peru.

"Despite the current economic downturn, the gaming industry in Chile is still achieving good growth and there will be further opportunities in the next year or so to bid for additional licences in Chile," Stephens said.

According to him, the debt in the Latin American business has been restructured and the business has sufficient capacity to fund its expansion plans.

"We raised the debt from a combination of Chilean banks, comprising BCI, BBVA, Santander and Itau-Corpbanca banks. This is a huge vote of confidence in our ability to consolidate, grow and expand further into the region,” said Stephens.

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