Sun International vehemently rejects unsolicited offer

  • A Chilean investment company, Nueva Inversiones Pacifico Sur (IPS) wants to acquire a 50.1% controlling stake in Sun International
  • With an 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

Nueva Inversiones Pacifico Sur (IPS) 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 that the group had 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. 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”.

Commenting on reports in a press statement issued by Sun International, Leeming said, “It is surprising and unfortunate that IPS chose to go public with an unsolicited announcement that is neither an offer nor a firm commitment to make an offer. By sharing a non-offer with media they have created confusion and led to speculation in our share.  They have not even discussed the offer with our major shareholders and had they done so, as we have, they would have realised their proposal has little chance of success. Leeming confirmed that Sun has previously received several similar unsolicited, non-binding proposals from IPS. As with these previous proposals, the recent one lists stringent pre-conditions but fails to address any concerns raised by Sun International, including the significant and material litigation claim which Sun International has against IPS, as referred to in the IPS Announcement. The recent announcement was also highly irregular in that it was discussed in the media without first being first published on SENS. “Our full focus right now is on pushing ahead with our proposed rights offer. Like most businesses the world over we have been negatively affected by the lockdown, but we are on the verge of reopening. We have a strong brand and quality offering so we are confident that we will soon regain lost ground.

“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.

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