Sun pays Peermont E38.5m as merger deal rejected

Sun International Peermont
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Sun International has settled a legal dispute with rival African casino and hotel firm Peermont Global, after hopes of a merger agreement between the companies were dashed by South Africa’s competition authority.

 

[dropcap]S[/dropcap]un International has agreed to pay a multi-million dollar fee to fellow South African hotel and casino operator Peermont Global, after its bid to acquire the company was rejected by the country’s Competition Commission.

Sun announced that it would purchase its smaller rival last March, after Peermont launched a legal objection to the development of a new resort in Menlyn Maine, Pretoria. The dispute was settled when Sun agreed to pay ZAR9.4bn (E536m) to acquire the entire Peermont portfolio – inclusive of its flagship Emperor’s Palace property in Johannesburg.

However, on the condition that the merger deal fell through, Sun agreed to pay as much as ZAR900m (E51m) as recompense for the opening of its new Menlyn Maine casino.

The South African authorities recommended that the merger not take place in December, citing competition concerns within the Gauteng gambling market. A hearing to review the case has been scheduled to take place later this month, well past a March 31 deadline but Sun and Peermont had agreed as the cut-off for the agreement to be solidified.

Menlyn MaineAccording to Bloomberg, both parties have now agreed to abandon the deal. However, as the property at Menlyn Maine is now “at an advanced stage of construction,” renewed discussions between the companies have resulted in Sun agreeing to pay ZAR675m (E38.5m) to Peermont (a substantial reduction on the original agreement) in order to gain the company’s acquiescence to the casino’s opening next spring.

Held by a private equity group, Peermont owns and operates 16 casino and hotel properties throughout South Africa, Botswana and Malawi.

The fact that Sun and Peermont have chosen to settle their dispute privately is perhaps indicative of the notoriously slow pace of South Africa’s competition authority. The regulator has missed four deadlines already in the E94.4bn takeover of brewing and beverage company SABMiller by Belgian rival Anheuser-Busch InBev (of Budweiser and Stella Artois fame). SABMiller itself has had recent firsthand experience of the kind of time-frame South African due process now requires: an agreement between itself and Coca- Cola to combine bottling facilities was only recently given final approval, after an arduous 18-month process.

Across the Atlantic, Sun International’s global expansion strategy is proving more successful, as Chile’s gaming board, the Superintendencia de Casinos de Juego, approved the group’s merger with operator Dreams SA. Originally announced in September 2015, the merger created the largest gaming operator in Latin America and is valued at $400m (E358m).

Dreams has built a strong base in Chile where it now operates six casinos and it has more recently expanded into Peru, where it operates four smaller gaming establishments focused primarily on the capital, Lima, with plans to expand across the region.

The merged entity will have a sizeable portfolio of assets situated across four countries, making it the premier gaming group in Latin America, and initially consisting of 13 properties, that between them have 6,500 slot machines, 300 table games, six hotels and 25 restaurants.

Commenting on the deal, Sun chief executive Graeme Stephens said: “In order to achieve critical mass in Latin America, we believed we should pursue a merger of our assets with another like-minded player with a substantial presence in the region. In addition to accelerating our growth strategy, a merger will also diversify our concentration risk.

“We’ve been looking for a suitable partner in Latin America for some years and in Dreams, we have a partner with a strong presence in Chile, a country which we understand well where we were looking for further exposure. We also have a partner with an expansion strategy that has seen them grow a presence in Peru, which is complementary to Sun International’s expansion into Panama and Colombia.”


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