Leisure, casino and hospitality group Sun International, which announced a R604-million broad-based black economic empowerment (BEE) deal on Monday, is no stranger to BEE. In fact, the group was doing it long before it become either fashionable or practically obligatory.
According to CEO designate David Coutts-Trotter, who takes over the reins from Peter Baker in July next year, Sun International has been at the forefront of BEE in the leisure industry with all new casino operations being owned in partnership with empowerment groupings — an initiative that started as far back as the mid-Nineties.
Empowerment, he adds, has been an integral part of Sun International’s business strategy, particularly with respect to new casino-licensing and bidding processes.
The deal announced on Monday, which sees 7% of the group being hived off to a group of historically disadvantaged individuals, including Sun International’s staff and black management, takes black ownership in the group to more than 25%.
The deal is part of Sun International’s empowerment undertaking to the North West Development Corporation in 2003. The group’s new BEE partner will be a newly created investment holding company, Dinokana Investments.
Dinokana will pay a consideration of R392-million for its 7% interest in Sun International. The R216-million balance between the acquisition price and the value of the shareholding, which is R604-million, will be borne as a one-off, upfront cost by Sun International shareholders.
The lead BEE partner in Dinokana will be Lereko Investments, with a 28,05% stake in Dinokana, resulting in an effective 1,96% interest in Sun International.
Other BEE parties are individuals and groupings with a link to the North West province, and the Sun International Employee Share Trust, with a 43% shareholding in Dinokana, through which it will acquire an effective 3,01% stake in Sun International.
Dinokana will raise the R392-million via preference share funding from Nedbank Limited on market-related terms and conditions, the hotel and casino group said.
Two Dinokana directors, Lulu Gwagwa and Valli Moosa, South Africa’s former minister for environmental affairs and tourism, have been proposed for appointment to the Sun International board of directors.
“The shares in Dinokana have been allocated specifically to parties with a link to the North West province, as well as a large portion to Sun International’s current and future employees and black management. Sun International has structured the proposed BEE transaction with a broad base focused on the North West province,” says Coutts-Trotter.
A condition of the group’s casino licences in the North West province was to sell or transfer no less than 5% of the equity of Sun International to empowerment entities, including previously disadvantaged individuals and groupings from the North West province, by June 30 next year.
Says Lereko’s chairperson, former North West premier Popo Molefe: “Dinokana has been specially created to hold this interest in Sun International. This is a long-term investment and the terms of the deal mean that Dinokana will not dispose of its shares for a full nine-year period.
“The Sun International shares held by Dinokana carry full voting rights and full rights to participate in dividends. Dividends received by Dinokana will be used to service the dividends and capital on the preference share funding.”
“This is a significant step forward in the transformation of our leisure industry in South Africa,” notes Coutts-Trotter. “Moreover, it is demonstrative of our commitment to a new order in the ownership of tourism and leisure and entertainment assets in this country.
“We view BEE as a value-creating strategy, designed to create realistic, meaningful and enduring partnerships. Sun International believes that effectively and properly implemented BEE will be a key driver of sustainable economic growth and transformation in South Africa.” — I-Net Bridge