Sun International turns down Chilean investment firm offer 

Sun International CEO Anthony Leeming unveiled on Thursday an unsolicited offer by the company’s Chilean partner, Nueva Inversiones Pacifico Sur (IPS),  to buy a 50.1% stake in the casino and hotel operator.

On Tuesday, the investment firm proposed purchased a 1.5 billion rand ($86.06 million) stake in Sun International in a part-cash offer that also includes a bridge loan of up to 1.2 billion rand.

“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,” Leeming said in a statement.

Soth Africa-based Sun’s shares shot up 22% in the last few minutes of the trading day after the announcement, before paring gains early on Thursday.

Value Capital Partners, which has a 20% stake in Sun, said it opposes the proposal as significantly undervaluing the company. The Johannesburg-based investment firm “does not believe a sale at artificially depressed prices is in the interest of existing shareholders,” it said in an emailed statement.

Sun, the owner of the Sun City resort northwest of Pretoria, was forced to close its properties in late March as part of lockdown measures to contain the coronavirus, BNN Bloomberg reports. While President Cyril Ramaphosa said last week that casinos will soon be allowed to reopen, the conditions haven’t yet been set and Sun has said they may include restrictions on the number of slot machines and alcohol sales.

An ongoing ban on interprovincial travel will also hamper any speedy recovery in demand, Sun said in a presentation to investors. Employees will be paid only part of their salaries until trading returns to normal levels even after the casinos and hotels reopen.

Ongoing Litigation

Nueva’s proposal doesn’t represent a formal offer and is one of several unsolicited moves made by the Chilean company that have come with several conditions, Sun said in a statement Thursday. The unresolved issues include a legal dispute between Sun and Nueva in Chile, where the two firms have been partners since 2016.

Nueva said it would underwrite at least half of a 1.2 billion rand rights issue if the move is successful, and will provide a bridge loan to ensure liquidity during the ongoing crisis. The comany is being advised by Goldman Sachs Group Inc. and is owned by brothers Claudio and Humberto Fischer.

Sun’s shares traded 2.3% lower at 17.68 rand as of 9:16 a.m. in Johannesburg, valuing the company at 2.4 billion rand.