Sun International to buy Peermont Group for R9.4bn
Sun International plans to acquire gaming and hotel company Peermont Group, which owns Emperors Palace in Kempton Park.
Hotel and leisure group Sun International plans to acquire the business of Peermont Group which owns Emperors Palace, following the conclusion of definitive agreements between it and Peermont in a R9.4bn deal.
The deal might be the last card played in consolidation of the casino sector — largely regarded as lacking growth due to brittle economic conditions and increased competition from gambling formats like electronic bingo and limited payout machines.
Peermont operates a portfolio of gaming and hospitality businesses, including its flagship Emperors Palace casino resort, three stand-alone hotels and one stand-alone casino.
“The proposed transaction is aligned to Sun International’s strategy to enhance and leverage its existing asset portfolio and to seek new growth opportunities,” Sun International CEO Graeme Stephens said.
“The acquisition of Emperors Palace provides Sun International with an opportunity to increase gaming revenue from Gauteng, being the provincial jurisdiction with the highest gambling spend in South Africa.”
The hotel and leisure group added that Emperors, one of the largest casinos in South Africa, also boasts an attractive financial and operating profile.
“As a result of the proposed transaction, Sun International’s portfolio of South African assets will be further diversified,” it said.
According to the group, this diversification has the effect of reducing Sun International’s reliance on its GrandWest property in the Western Cape, which currently represents 27 per cent of the group’s EBITDA.
“The Peermont portfolio of assets also opens the possibility of further restructuring of local assets, with a medium term objective of creating a portfolio of fewer, larger, quality assets,” Sun International said.
“Sun International believes that the proposed transaction and the further restructuring possibilities that may arise from it, will further enhance its position and scale as a leading hotel, resort and gaming operator.”
Sun International will acquire 100 per cent of the issued ordinary shares of Maxshell and the preference shares and mezzanine debt for a purchase consideration determined with reference to an enterprise value of Peermont of 9.4 billion rand.
This is less net debt and certain capital expenditure, working capital benchmark adjustments, if applicable, calculated at the effective date of the proposed transaction.
The group will also assume all the debt currently within the Peermont Group and intends to fund the proposed transaction via the proceeds of an underwritten renounceable rights offer and a new estimated debt facility, to name a few.
“Sun International intends exploring the possibility of disposing of certain of the smaller assets within the Peermont portfolio following the closing of the proposed transaction,” it added.
Casino sector consolidation began in 2006 with Peermont’s takeover of the Tusk Group. Three years later Tsogo Sun acquired Century Casinos’ Blackrock and Caledon properties, and two years later it bought out Gold Reef Casinos and Resorts. Last year, Tsogo Sun was offered a 40% stake in Sun International’s GrandWest and Worcester casinos.
Market sources estimate that if the Peermont deal is approved by competition and gambling authorities, ownership of more than 95% of the casino market will be in the hands of Sun International and Tsogo.
