| Wed 23 Mar 2005, 16:58 | | Sun International Limited - Disposal Of Sun Intern |
|
Sun International Limited - Disposal Of Sun International`s
Interest In City Lodge Hotels Limited (`City Lodge`)
Sun International Limited
(formerly Kersaf Investments Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1967/007528/06)
Share code: SUI ISIN: ZAE000054995
(`Sun International`)
DISPOSAL OF SUN INTERNATIONAL`S INTEREST IN CITY LODGE HOTELS
LIMITED (`CITY LODGE`)
1. INTRODUCTION
Investec Bank Limited is authorised to announce that Sun
International intends to dispose of all of the City Lodge
ordinary shares held by Sun International (`the proposed
disposal`), amounting to 38,6% of the total City Lodge shares in
issue (`the City Lodge shares`).
Another major shareholder in City Lodge, Enderle S.A.
(Proprietary) Limited (`Enderle`), that holds 12,6% of the City
Lodge shares in issue, has a pre-emptive right over Sun
International`s City Lodge shares (`the pre-emptive`), further
details of which have been set out in paragraph 5 below.
2. THE PROPOSED DISPOSAL
Sun International proposes to dispose of the City Lodge shares
to the shareholders of Sun International (`the Sun International
shareholders`) in exchange for the acquisition by a Sun
International subsidiary (`Newco`) of Sun International shares,
pro rata from all the Sun International shareholders (`the
proposed share buy-back`), equivalent in value to the City Lodge
shares disposed of.
Alternatively, to the extent that Enderle exercises the pre-
emptive, or if the proposed disposal is implemented by way of a
sale to a third party (`a third party disposal`), the cash
proceeds arising therefrom would be utilised to complete part or
all of the proposed share buy-back.
The majority of the Sun International shares (approximately 5%
of the shares then in issue) bought back will be used to
introduce a Black Economic Empowerment (`BEE`) consortium into
Sun International (`the proposed BEE transaction`) (collectively,
`the proposed transaction`).
3. THE PROPOSED DISPOSAL CONSIDERATION
Sun International proposes to dispose of the City Lodge shares
at a fixed price of R38,50 per share, being the ruling City Lodge
share price on the JSE Securities Exchange South Africa on the
day preceding this announcement plus a premium of 4,3%, equating
to a value of approximately R627 million for the City Lodge
shares (`the fixed price`). Sun International has offered the
City Lodge shares to Enderle in terms of the pre-emptive at the
price of R38,50 per share.
The final switch ratio of City Lodge shares to Sun
International shares in terms of the proposed share buy-back will
be determined with reference to the R38,50 fixed price and the
market price of Sun International shares at the date of the
actual disposal of the City Lodge shares (`the proposed
transaction consideration`). The quantum of either City Lodge
shares and/or cash, to be received by the Sun International
shareholders will depend on the number of City Lodge shares taken
up by Enderle with respect to the pre-emptive or the number of
City Lodge shares sold in terms of a third party disposal.
4. RATIONALE
As part of the strategy to simplify the Sun International group
structure consideration has been given to the desirability of the
Sun International group (`the group`) retaining its interest in
City Lodge. The Sun International Board has decided that, whilst
City Lodge has performed very well and has good prospects, it is
not core to the group`s business.
In addition, the joint control structure with Enderle is not
considered appropriate following the merger between Sun
International and Sun International (South Africa) Limited
(`SISA`) and the positioning of Sun International as an operating
company as opposed to an investment holding company.
The Sun International shares bought back by Newco will not be
cancelled and will be retained as treasury stock, the majority of
which will be used to facilitate the introduction of a BEE
consortium into Sun International.
During September 2003, Sun International acquired an effective
18,6% shareholding in its subsidiary SISA from the North West
Development Corporation (Proprietary) Limited. Shareholders were
advised at that time that Sun International undertook to
introduce an appropriate level of empowerment at the group level.
This undertaking was subsequently formalised by the North West
Gambling Board and became a condition of the group`s casino
licences in the North West Province. The condition requires the
group to facilitate the sale or transfer of not less than 5% of
the equity of Sun International to empowerment entities,
including previously disadvantaged individuals and groupings from
the North West Province, by no later than 30 June 2006.
Together with the 5% shareholding, which is the subject of the
proposed BEE transaction, the overall value of ownership by
previously disadvantaged individuals and groupings in Sun
International and its subsidiaries will exceed 25% of the
aggregate value of all of the group`s operations.
5. THE PRE-EMPTIVE
A shareholders` agreement was entered into between Sun
International and Enderle on 15 December 1993 (`the shareholders`
agreement`), wherein, among other things, the terms and
conditions on which either Sun International or Enderle could
dispose of their respective shares in City Lodge were regulated.
In terms of the pre-emptive the holder of the pre-emptive may
acquire the City Lodge shares to be disposed of by either Sun
International or Enderle upon the terms and conditions offered to
it by that offeror, provided that if the holder of the pre-
emptive does not exercise the pre-emptive, the offeror may not
dispose of the City Lodge shares to third parties on more
favourable terms and conditions than those offered to the holder
of the pre-emptive. The holder of the pre-emptive has 120 days
(`the pre-emptive period`) to exercise the pre-emptive. The pre-
emptive period will therefore end on 21 July 2005.
The shareholders` agreement also includes a clause whereby,
should either Sun International or Enderle wish to dispose of
greater than 75% of their interest in City Lodge and the
remaining shareholder notifies the offeror within the pre-emptive
period that it wishes to dispose of the same proportion of its
interest in City Lodge, then the offeror shall not be entitled to
dispose of its shares unless it has procured the same terms and
conditions for the remaining shareholder.
6. FURTHER INFORMATION
To the extent that Enderle does not exercise the pre-emptive,
Sun International is under no obligation to proceed with the
proposed disposal after the pre-emptive period.
Should Sun International proceed with the proposed transaction,
a detailed terms announcement setting out the detailed terms of
the proposed disposal, salient dates and financial effects of the
proposed transaction will be made to Sun International
shareholders in due course.
Sandton
23 March 2005
Investment bank
Investec Corporate Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Legal advisors
Hofmeyr
Hofmeyr Herbstein & Gihwala Inc.
Registration number 1997/001523/21
Sponsor
Investec Bank Limited
(Registration number 1969/004763/06)
Date: 23/03/2005 04:00:06 PM
Produced by the JSE SENS Department
