Sun International buys Emperors Palace owner’ Peermont Holdings for R7.3bn
Sun International on Monday announced that it had acquired Peermont Holdings, a leading hospitality and entertainment group, in a R7.3 billion deal, which includes the flagship Emperors Palace Resort, saying it would further enhance the group’s online business platform with opportunities for growth.
Sun International, which is a hotels, gaming and entertainment group whose portfolio includes, Sun City Resort and The Table Bay hotel on the V&A Waterfront, said it had entered into an agreement with the shareholders of Peermont to acquire all of the issued ordinary shares and any claims on loan account against Peermont Group.
The exact purchase consideration payable in cash to the sellers would be determined with reference to an enterprise value of the Peermont Group of R7.3bn, less net debt and certain sellers’ transaction costs and subject to capital expenditure and working capital adjustments, if applicable, calculated at the closing date of the proposed transaction, estimated to amount to approximately R3.24bn as at September 30, 2023.
In a statement the JSE-listed group said, “The acquisition represents a unique opportunity for Sun International to acquire a group of gaming and hospitality assets of significant scale and quality, together with operating one of the largest, most cash generative, high-quality casinos situated in a major metropolitan area.
“With its unique proximity to the OR Tambo International Airport, Emperors Palace offers a gateway to high net-worth customers from the rest of Africa and abroad. This customer base will drive opportunities for synergies with the rest of the Group’s operations, including hotels and resorts, as well as the online sports and gaming business, creating large-scale benefits for Sun International.”
It said in alignment with Sun International’s strategy, the proposed acquisition would further enhance the group’s online business platform with opportunities for growth by extending Sun International’s proven SunBet management team’s reach across the Peermont Group’s assets. In addition, extending the Group’s omnichannel strategy across a scaled customer base unlocks operating leverage across revenues, marketing reach, payment processing efficiencies and game liquidity.
Founded in 1995, the Peermont Group's physical properties offer 3 349 slot machines, 152 gaming tables and 1 636 hotel rooms in South Africa and Botswana.
Sun International CEO Anthony Leeming said: “Sun International has, over the last six years, repositioned itself from a highly geared hospitality and gaming group operating across several regions in Africa and Latin America, to a simplified and locally empowered South African-focused, cash generative business with disciplined capital allocation principles.
“The group’s strong performance over the past two years has increased available capital for the Group and put us in the enviable position of being able to consider value accretive acquisitions at an attractive point in the cycle.”
In September Sun International posted an 11.7% increase in income to R5.8 billion for the six-month period ended June 30, 2023 in spite of incurring R60 million in net diesel costs to mitigate the impact of load shedding.
The markets cheered a 68.2% dividend hike to 148 cents per share.
Leeming said the addition of Peermont’s land-based casinos to the group’s portfolio, underpinned by the flagship Emperors Palace Resort, would enhance the quality of earnings and cash flow generation of the group. This was consistent with the group’s strategic intent to focus its portfolio on large urban casinos with the ability to drive value-enhancing strategies across smaller regional assets and online growth.
“The Peermont Group’s entrepreneurial management team has been a significant factor in its success and the shared expertise of the staff and management of the combined group will result in mutual benefits and efficiencies. Further, we are encouraged that the proposed transaction creates more opportunities for our staff to develop and grow within the combined group.
“We will leverage off combined synergies to drive margin enhancement and capital efficiency. Importantly, we are in a position to conclude a transaction of scale, rapidly de-gear and maintain a dividend pay-out as a result of the Group’s excellent recent performance and strong financial position thereby benefiting our locally empowered South African shareholder base,“ said Leeming.
Implementation of the agreement was subject to the fulfilment of conditions precedent standard for a transaction of this nature, including approval by the relevant Competition Authorities, the Gauteng Gambling Board and Sun International shareholders.
Sun International chairman Sam Sithole said: “Sun International has already received written indications of support from shareholders holding approximately 63% of the issued shares of the group, underlining the confidence that our shareholders have in the management team as well as their support for the proposed transaction.
“Echoing this sentiment, the board believes that the combined group provides a compelling equity story, through increased scale, a larger enterprise value and greater capital markets visibility and is confident that the management team will deliver on the strategy.“
Sun International’s shares on Monday rose 1% to an intraday high of R40.96 after closing at R40.64 the prior day. The share move may not be reflective of market sentiment as the deal happens on December 18 when a lot of South Africans have embarked on a festive break.
BUSINESS REPORT