JSE-listed gaming and resort giant Sun International has swooped on unlisted gaming company Peermont Group – the owners of Emperors Palace casino complex in Kempton Park as well as several smaller casinos across the country – in a deal valued at R7.3 billion.
Sun International confirmed the acquisition in a Sens announcement on Monday, however the deal is subject to conditions precedent, including securing competition authority approvals in South Africa and Botswana.
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Peermont’s assets or enterprise value is R7.3 billion, according to Sun International’s statement. However, after its debt commitments and other transaction costs, the group is valued at R3 236 million as at 30 September 2023.
Founded by the late hotel and casino magnate Sol Kerzner in the 1970’s, Sun International owns landmark casino resorts like Sun City and Wild Coast Sun. Kerzner exited in the late nineties, to embark on his global hotel and casino ambitions.
“Sun International is pleased to announce the proposed acquisition of Peermont Holdings Proprietary Limited…”
“The board of directors of Sun International hereby advises shareholders that on 14 December 2023, Sun International entered into a sale agreement in terms of which it will acquire, through its wholly owned subsidiary, Sun International South Africa Limited [SISA], all of the issued ordinary shares of and any claims on loan account against Peermont Holdings from the shareholders of Peermont Holdings… subject to the fulfilment or, to the extent legally permissible, waiver, of the conditions precedent…” it said in the Sens.
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Sun International said it is a “unique opportunity to acquire the world-class and highly cash-generative Peermont business”.
Other highlights cited:
- Purchase price enterprise value of R7 300 million (R7.3 billion)
- Implied acquisition EV/EBITDA multiple of 5.76x
- Fully debt funded with comfortable pro-forma gearing
- Expected to rapidly de-gear, allowing the combined group’s equity value to significantly increase
- 54% of Sun International shareholders have provided written indications of support for the proposed transaction.
Sun International said that Peermont’s “land-based casinos, underpinned by the flagship Emperors Palace Resort, will enhance the quality of earnings and cash flow generation of the group” as one of the key strategic merits of the planned deal.
Other merits the group cited include:
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- Increasing the contribution of land-based and online gaming revenue to the combined group
- Opportunity to leverage off Sun International’s proven SunBet management team’s expertise to accelerate and further grow the online and sports betting business through extending the group’s omnichannel strategy across a scaled customer base
- Ability to leverage off combined synergies to drive margin enhancement opportunities and capital efficiency
- Ability to conclude a transaction of scale, rapidly de-gear and maintain a dividend pay-out
- The combination of Sun International and Peermont provides a compelling equity story, through increased scale, a larger enterprise value and greater capital markets visibility.
Sun International said that Peermont Group is a leading hospitality and entertainment group of companies that operates 11 properties located across South Africa and Botswana, in addition to the online sportsbook, PalaceBet.
“Founded in 1995, the Peermont Group has developed an excellent track record in the design, development, management, ownership and operation of multifaceted integrated resorts, including hotels, casinos, convention centres, retail centres, health spas, restaurants, bars and other sport and entertainment facilities,” it noted.
“This track record and differentiated approach bodes well as a further addition to the Sun International stable,” the group added.
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Sun International’s debt load will more than double, to over R13 billion, if the transaction secures the relevant approvals and is implemented as a full takeover.
“The purchase consideration will be funded by new debt facilities, estimated to result in Sun International’s South African debt levels as at 30 June 2023 of R5 926 million increasing to approximately R13 186 million, calculated on a pro forma basis, after the implementation of the proposed transaction,” the group said in its announcement.
