Johannesburg-based Sun International Ltd., owner of the Sun City resort, announced it will buy local rival Peermont Global for 8 million to add leisure operations and increase gambling sales. The purchase will allow Sun to “undertake larger developments and acquisitions internationally,” officials said. Founded by South African hotel magnate Sol Kerzner, Sun is South Africa’s biggest hotel and casino operator by number of markets, with 27 resorts across Africa and the Americas.
Founded in 1995 under the name Global Resorts, the group was rebranded Peermont Global in 2003. It was purchased in a private equity-led buyout by a consortium led by Mineworkers Investment Company. Peermont owns the Emperors Palace resort, near Johannesburg, with 667 rooms and 1,724 slots. The company also operates a portfolio of gaming and hospitality businesses in South Africa and Botswana, owning nine casino resorts, three hotels and one casino.
Sun International’s Chief Executive Graeme Stephens said, “Emperors Palace is one of the largest casinos in South Africa with an attractive financial and operating profile. Peermont has a number of complementary attributes that will enhance our group. This acquisition will enhance Sun International’s position and scale as a leading hotel, resort and gaming operator, which in turn positions it well to undertake larger developments and acquisitions globally.” Stephens added Sun International’s medium-term objective is to “create a portfolio of fewer, larger, quality assets.”
Anthony Puttergill, chief executive at Peermont Group, said, “The proposed transaction is a positive development for Peermont and supports the momentum that we have built during the past few years. We believe that a number of strong growth opportunities can be unlocked by being part of a larger and well-resourced group.”
Wayne McCurrie, a money manager at Johannesburg-based Momentum Asset Management, said, “This deal ensures a consolidation of the market and is clearly the right strategy. Sun will immediately cut money on direct overheads and will close smaller, marginal casinos.” However, he noted, “This is a seriously large transaction. It’s still to be seen if Sun has overpaid.”
Sun will fund the deal with the proceeds of a rights issue and more than 10.4 million new shares at 120 rand each. Also, Sun will take on all of Peermont’s debt, all the debt carried by Peermont.
In a first-half earnings statement last month, Sun said it “continues to operate in a subdued and challenging economic environment, in particular in its core South African business,” although gaming revenue gained 6 percent in January, compared with a 1 percent decline in December. McCurrie said gambling “hasn’t turned out to be the recession-proof industry and license to print money that it has been thought of.”
