Gold Reef Resorts and Tsogo Sun have agreed to merge their gaming and hotel businesses, creating one of the largest gaming and hotel company in European, Middle East and Africa regions, with an expected market capitalisation of about R21 billion.
Tsogo Sun, which has international operations, has been buying shares in Gold Reef and already owns 24.9 percent of the company. The merger will be achieved through an acquisition of Tsogo shares by Gold Reef in return of the issue of new Gold Reef shares to form a merged company, which will be listed on the JSE.
Gold Reef said yesterday that it would issue about 889 million new shares as consideration for the acquisition of Tsogo, a reverse takeover resulting in Tsogo Investment Company owning 41.3 percent and South African Business Schools Association 39.7 percent of the merged company, with Gold Reef shareholders owning 19 percent.
Based on the closing share price of R12.95 for Gold Reef on Friday, January 29 - the last trading day before a cautionary announcement - this implies a value of R17.1bn for Tsogo.
Shares closed 3.38 percent lower at R20 yesterday.
Gold Reef shareholders' register on the dividend record date will receive a dividend of not more than 65c a share for the year to December.
Steven Joffe, the chief executive of Gold Reef, said the deal would give Gold Reef shareholders direct access to Tsogo's attractive portfolio of assets.
The merger is dependent on the majority shareholders' agreement in all three companies, and the approval of relevant competition authorities and gambling boards.