TSOGO SUN HOTELS LIMITED - Acquisition of additional shares in Hospitality Property Fund

Acquisition of additional shares in Hospitality Property Fund

Tsogo Sun Hotels Limited
(previously known as Southern Sun Hotels Proprietary Limited)
Incorporated in the Republic of South Africa
Registration number 2002/006356/06
Share Code: TGO ISIN:ZAE000272522
(“Tsogo Sun Hotels” or “the Group” or “the Company”)



ACQUISITION OF ADDITIONAL SHARES IN HOSPITALITY PROPERTY FUND



1.   INTRODUCTION

     Shareholders are referred to the announcement released on SENS on 3 July 2020 advising shareholders that the
     Company was considering acquiring additional ordinary shares (“Hospitality Shares”) in Hospitality Property Fund
     Ltd (“Hospitality”). In order to allot and issue ordinary shares in the authorised and unissued share capital of the
     Company for the purpose of an acquisition issue in terms of the JSE Listings Requirements, an ordinary resolution
     was proposed in terms of section 60 of the Companies Act to allow the board to acquire assets (such as ordinary
     shares in Hospitality) in exchange for ordinary shares in the Company. This ordinary resolution was duly approved
     by the Company’s shareholders entitled to exercise more than 50% of the voting rights exercisable thereon.

     Shareholders are now advised that the Company has entered into share for share agreements with Allan Gray
     Proprietary Limited (acting for and behalf of numerous of their clients under discretionary mandates), and numerous
     clients of each of Aylett & Co Proprietary Limited, Prudential Investment Managers (South Africa) Proprietary Limited
     and Bateleur Capital Proprietary Limited (each of whom acted on behalf of their clients under discretionary
     mandates) (collectively, the “Sellers”) to acquire, in aggregate 46 137 907 Hospitality Shares (“Sale Shares”) from
     their respective clients, in aggregate constituting 7.98% of Hospitality’s issued share capital (collectively, the “Share
     for Share Transactions”).

2.   DESCRIPTION OF THE ASSETS

     Hospitality is a specialised REIT on the JSE investing in the hospitality industry, providing investors with exposure to
     income streams from the hospitality sector. Hospitality’s portfolio comprises 54 properties with more than 9,000
     rooms in South Africa.

3.   RATIONALE FOR THE ACQUISITION

     Hospitality has consistently traded at a substantial discount to its net asset value. Furthermore, the nature of the
     business of Tsogo Sun Hotels and Hospitality are substantially similar and have in-principle the same economic
     drivers. Hotels owned by Hospitality and operated by Tsogo Sun Hotels make up the majority of both Groups’
     economic value and therefore the acquisition of Hospitality shares in exchange for the issue of shares in the Company
     results in the new Tsogo Sun Hotels shareholders being exposed to substantially the same industry risks and rewards.

4.   PURCHASE CONSIDERATION

     The Sale Shares were acquired in exchange for the issue and allotment of 81 664 082 Tsogo Sun Hotels ordinary
     shares (collective, the “Subscription Shares”) at an exchange ratio of 1.77 Tsogo Sun Hotels shares for every 1
     Hospitality Share acquired.

     If prior to the date that is six months after the signature date of the respective transaction agreements in respect of
     the Share for Share transactions, the Company concludes an agreement with any Hospitality shareholder pursuant
     to which the consideration payable exceeds 1.77 Tsogo Sun Hotel shares, the Company will issue additional shares
     to the Sellers (or their clients, as the case may be) such that the Sellers (or their clients, as the case may be) will in
     aggregate have received the same number of shares as if the ratio was equal to the ratio of Tsogo Sun Hotels shares
     to Hospitality shares in the relevant transaction.

5.   EFFECTIVE DATE OF THE SHARE FOR SHARE TRANSACTIONS

     The Share for Share Transactions are unconditional. The effective date of the last agreement in respect of the Share
     for Share Transactions will be three business days after the date on which the JSE approves of the listing of the
     Subscription Shares, which is anticipated to be no later than 22 July 2020.

6.   FINANCIAL INFORMATION

     The value of the net assets of Hospitality as at 31 March 2020, being the date of the last audited annual financial
     statements, was R7,673,768,000.

     The audited net loss of Hospitality for the 12 months ended 31 March 2020, per the last audited financial statements
     was R1,988,171,000. The audited financial statements were prepared in terms of IFRS.

7.   WARRANTIES

     The Share for Share Transaction agreements contain representations and warranties which are standard for
     transactions of this nature.

8.   CATEGORISATION

     The Share for Share Transactions constitute a Category 2 transaction for Tsogo Sun Hotels as contemplated in the
     Listings Requirements of the JSE Limited, when determined on an aggregated basis.



Fourways

20 July 2020

Financial advisor: Investec Bank Limited

Sponsor: Investec Bank Limited

Legal advisors: Edward Nathan Sonnenbergs Incorporated

Date: 20-07-2020 10:00:00
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