Southern Sun, Hospitality Property Fund given merger green light

Tsogo Sun CEO Marcel von Aulock said he was pleased with the Southern Sun and Hospitality Property Fund merger.

The Competition Tribunal approved the merger between Southern Sun Hotels and JSE-listed Hospitality Property Fund (HPF).

The Hospitality Outlook: 2014-18 report by PwC says that although SA’s economy is facing headwinds, the hospitality sector is poised for growth in the next five years, in the wake of a number of inbound travellers into the continent.

Southern Sun Hotels, owned by JSE-listed gaming and leisure group Tsogo Sun, last week was given the green light to acquire a 50.6% controlling stake in Hospitality by vending a portfolio of ten hotel properties valued at about R1.8bn into Hospitality in exchange for Hospitality shares.

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Southern Sun operates various hotels throughout South Africa under several brand names, including Southern Sun, Garden Court, SunSquare and Sun1.

Hospitality is a real estate investment trust (Reit) which owns hotel properties and provides leasing services to third-party hotel operators.

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The Competition Commission had had concerns over the sharing of information.

“While the commission found that in various geographic areas the merging parties would continue to face competition, it was concerned that since the Hospitality Property Fund leases hotel properties to Southern Sun Hotels’ competitors, the merged entity had the ability to potentially exclude competitors by not renewing their lease agreements and share sensitive competitive information,” the tribunal said.

“The merger was approved subject to a number of conditions including that the merging parties ensure that the HPF has its own executive management team, which will be responsible for day-to-day operations of the HPF. The team will not include anyone who is involved in management in any capacity at Southern Sun,” it said.

Tsogo Sun CEO Marcel von Aulock said he was “really pleased this process is completed” and he looked forward to implementing the transaction.

According to the World Travel and Tourism Council, the direct contribution of travel and tourism to GDP in SA was R113.4bn in 2014 (3% of GDP). The contribution is expected to grow 4.6% per annum to R184.7bn (3.4% of GDP) by 2025, reflecting the economic activity generated by industries such as hotels and airlines.