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GRAND PARADE INVESTMENTS LIMITED - Disposal Of Interest In Sun Slots (RF) Proprietary Limited

Release Date: 30/08/2019 12:00
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Disposal Of Interest In Sun Slots (RF) Proprietary Limited

GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
(“GPI” or the “Company”)

DISPOSAL OF INTEREST IN SUN SLOTS (RF) PROPRIETARY LIMITED

1.   BACKGROUND AND RATIONALE

     Shareholders are advised that the Company, through its wholly-owned subsidiary Grand
     Casino Investments Proprietary Limited (“GCI”), has today, 30 August 2019, entered into
     a repurchase agreement (“Agreement”) with Sun Slots (RF) Proprietary Limited
     (“Sun Slots”), in terms of which GCI will sell all the shares it holds in Sun Slots, comprising
     30% of Sun Slots’ entire issued share capital (“Sale Shares”) back to Sun Slots for a
     repurchase consideration of R504 331 186 (“Consideration”) (“Disposal”).

     GPI acquired 100% of Sun Slots in June 2010 and subsequently sold 70% of its stake in
     Sun Slots to Sun International Limited (“Sun International”) in three tranches, reducing
     its interest in Sun Slots to 30% in 2016. Following discussions held with Sun International,
     the Company has elected to pursue the sale of its remaining 30% stake in Sun Slots.

     The Disposal will realise significant value for GPI shareholders and represents a 30%
     annualised return, based on the initial capital invested, and a 46% premium on the current
     carrying or book value of the asset.

     The proceeds from the Disposal will be used to reduce the debt associated with the asset
     (preference share funding), which is in line with GPI’s strategic objective to reduce debt
     to EBITDA to below 4 times. Importantly, the Disposal will free up the dividends from
     SunWest, previously utilised for debt repayments, and allow GPI to become dividend
     active once again. In addition to the reduction in debt, it is GPI’s intention to pass on a
     portion of the proceeds back to shareholder’s in the form of a special dividend and/or
     share buyback, the details of which will be announced in due course.

2.   DESCRIPTION OF SUN SLOTS

     Sun Slots holds and operates under various limited pay-out machine (“LPM”) gaming
     licences in various provinces across South Africa. LPMs function in the same way as
     casino slot machines, though with limited pay-out capacity, in line with prevailing gambling
     laws. As stated above, the remaining 70% of Sun Slots is owned by Sun International, via
     its wholly-owned subsidiary, Sun International South Africa Limited (“SISA”).

3.   PARTICULARS OF THE DISPOSAL

     As mentioned above, the Disposal entails the Company (via GCI) disposing of its 30%
     shareholding in Sun Slots to Sun Slots by way of a repurchase in terms of section 48 of
     the Companies Act, No 71 of 2008 (“Companies Act”), for the Consideration.

     Sun Slots have declared a dividend in the ordinary course for the quarter ending 30 June
     2019, which will be paid to the shareholders of Sun Slots (being GCI and SISA) prior to
     the Effective Date (as defined below). The relevant portion of this dividend payable to GCI
     shall not form part of the Consideration and shall be paid to GCI. Accordingly, the sale of
     the Sale Shares will be ex such dividend.

4.   CONSIDERATION AND APPLICATION

     Sun Slots will pay the Consideration in cash on the Effective Date (as defined below) as
     follows:

     -      firstly, an amount directly to GCI’s preference shareholder (“Pref Holder”) to settle
            the preference share funding associated with the Sale Shares outstanding as at
            the Effective Date (as defined below); and
     -      thereafter, the balance of the Consideration to GCI into GCI’s designated account.

5.   CONDITIONS PRECEDENT

     The Disposal is subject to the fulfilment of the following outstanding conditions precedent
     (“Conditions Precedent”):

     -      by not later than 6 September 2019, the board of directors and shareholders of
            GCI approving the Disposal;
     -      by not later than 30 September 2019, the Pref Holder agrees in writing to release
            all security interests held by it over the Sale Shares;
     -      by not later than 31 December 2019, the board of directors of Sun Slots approving
            the Disposal;
     -      by not later than 31 December 2019, the shareholders of Sun Slots approving the
            Disposal, as required by section 48(8)(b) of the Companies Act, by way of a
            special resolution adopted in accordance with the requirements of section 115 of
            the Companies Act;
     -      by not later than 31 December 2019, the shareholders of GPI approving the
            Disposal; and
     -      by not later than 31 December 2019, all regulatory approvals for the Disposal have
            been obtained, including the various Gambling Board approvals across South
            Africa.

     The parties will be entitled to waive or extend the dates of fulfilment of any of the
     Conditions Precedent, to the extent permissible in law, in whole or in part, by written
     agreement.

6.   EFFECTIVE DATE OF THE DISPOSAL

     Delivery and payment in respect of the Sale Shares will take place on the 5th business
     day following the date on which the Conditions Precedent are fulfilled (“Effective Date”).

7.   FINANCIAL INFORMATION

     The value of the net assets comprising the Sale Shares as at 31 December 2018, being
     the date of the last unaudited interim financial statements of GPI, was R 348.4 million.

     The unaudited profits after tax attributable to the Sale Shares for the 6-month period
     ended 31 December 2018, was R 30.2 million, based on the unaudited interim financial
     statements of GPI for the 6 months ended 31 December 2018, which were prepared in
     terms of IFRS.

8.   WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT

     The Agreement contains representations and warranties by the Company in favour of the
     Purchaser which are standard for a transaction of this nature.

9.   CLASSIFICATION OF THE DISPOSAL

     As the value of the Disposal exceeds 30% of the Company’s market capitalisation as at
     the date of the signature of the Agreement, it meets the definition of a category 1
     transaction as contemplated in section 9 of the JSE Limited Listings Requirements.

     As a result, the Disposal is required to be approved by an ordinary resolution of the
     shareholders of the Company and accordingly a general meeting of the shareholders of
     the Company will be convened.

10. CIRCULAR

     A circular containing the full details of the Disposal, incorporating a notice convening the
     required general meeting of the shareholders of the Company, will be distributed to
     shareholders in due course, at which time the salient dates and times of the Disposal,
     including the date of the general meeting, will be announced on SENS.


30 August 2019


Sponsor and Corporate Adviser

PSG Capital


Legal Advisors

Cliffe Dekker Hofmeyr

Date: 30/08/2019 12:00:00
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