Sun City owner's second biggest shareholder opposes Chilean firm's acquisition bid

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The Palace at Sun City Resort.
The Palace at Sun City Resort.
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  • A Chilean investment company, Nueva Inversiones Pacifico Sur wants to acquire a 50.1% controlling stake in Sun International
  • With at offer of R22 per share, it believes that it has put a compelling price on the table
  • It is also willing to offer the owner of Sun City a bridge loan to help it deal with short-term liquidity problems and to underwrite more than half of its proposed rights issue
  • But Sun International's second largest shareholder, Value Capital Partners, says R22 is not enough for a controlling interest


A Chilean investment company says it has made a formal proposal to acquire a majority stake in resort hotel chain and casino operator Sun International, owner of Sun City. 

Nueva Inversiones Pacifico Sur (IPS) said it approached Sun International's board and expressed a "firm intention" to acquire 50.1% of the hotel group's shares. It is offering a cash price of R22 per share. The group's shares were trading at R18.10 when the JSE closed on Wednesday, having recovered from a low of R8.33 towards the end of May.

Sun International CEO, Anthony Leeming, told Fin24 on Wednesday evening that the group has not received a formal offer from IPS yet to consider, but has seen the letter that the company published in the media about its intentions. "We are having discussions on the back of that letter and we will respond on the Sens (stock exchange news service) tomorrow," he said.

But Sun International's second largest shareholder, Value Capital Partners (VCP) has already made up its mind that it will oppose IPS' bid because the R22 per share price is not enough, it said. VCP which owns approximately 20.23% of Sun International's shares said it will not allow any company to acquire the listed leisure company at "artificially depressed prices".

"While we are obviously pleased that other investors see the significant value in the business, as we do, we believe this proposed offer significantly undervalues Sun International, particularly when one considers that the price offered should include a control premium. We believe that the majority of the other shareholders of Sun International would be of the same view," said VCP CEO, Sam Sithole on Wednesday night.

Sithole said the company supports all the actions that Sun International management and its board have taken so far to deal with the Covid-19 crisis, and we will continue to support other to strengthen the balance sheet, but not IPS' offer.  

IPS on the other hand believes that its offer is compelling and provides a win-win for all stakeholders groupings. It pointed out that the R22 offer equates to a 68.26% to Sun International’s 1-month volume weighted average price.

Sun International has been hard hit by SA's national coronavirus lockdown, which forced it to close its hotels in the country for three months. The group’s operations in Chile, Peru, Argentina, Colombia and Panama also closed in March.

As a result, the company has been forced to cut salaries and lay off staff to stay afloat.  It also recently announced that it is planning a R1.2 billion rights offer.

IPS said it also intended to provide Sun International with interim liquidity support in the form of a bridge loan, which is included in the offer that was presented to the board. It has also proposed to underwrite at least 50.1% of the R1.2 billion rights issue.

"If the partial offer is approved, this interim liquidity support would significantly strengthen Sun International’s ability to weather the uncertainty of Covid-19 in its key markets, while protecting shareholder value and preserving jobs," said IPS.

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