NEW YORK (The Deal) -- The world's second-largest brewer, SABMiller, confirmed on Monday it would sell its 39.6% stake in South African hotel and casino operator Tsogo Sun Holdings for 11.7 billion rand ($1.1 billion).
The London-based brewer of Miller Lite and Pilsner Urquell will sell about 305 million shares to Tsogo management and other investors in a secondary offering, while Tsogo will pay about R2.8 billion to buy back another 130 million shares.
Monday's agreement comes three months after SABMiller said it was reviewing options for its Tsogo stake. In 2011, SAB Miller merged Tsogo Sun -- which has been in its portfolio for three decades - with Gold Reef Resorts Ltd., reducing its holding to 39.6% from 49%. Tsogo Sun is listed on the Johannesburg Stock Exchange, where SABMiler has a secondary listing. SABMiller is second only to Anheuser-Busch InBev SA in the ranks of global brewers.
"Gaming and hotels are not core to our operations and we have concluded that the time is right for us to exit our investment through a transaction which is beneficial to shareholders of both SABMiller and Tsogo Sun," SABMiller CEO Alan Clark said in a statement.He said the company would reinvest the proceeds into its core businesses, including operations in Africa. Tsogo management will buy up to R200 million-worth of the 305 million shares being placed with investors, provided the executives enter into binding share purchase agreements and Tsogo Sun shareholders approve a R200 million loan facility for the board members. Johannesburg-listed Hosken Consolidated Investment Ltd. holds 41.3% of Tsogo Sun, and said last month it was not seeking to buy SABMiller's stake, while 19% of the company is in free float. Shares in SABMiller shares had edged down 28 pence to 3,369.50 pence by mid-morning in London. Tsogo Sun Holdings narrowed earlier losses to trade down 3.4% at R2,600 in Johannesburg. Tsogo operates 14 casinos in six South African provinces and owns 92 hotels offering 14,557 rooms from budget to luxury in South Africa and elsewhere in Africa, the Middle East and the Seychelles. It also owns theaters, cinemas, restaurants and bars; and more than 250 conference and banqueting facilities including the Sandton Convention Centre in Johannesberg. SABMiller's South African roots go back to 1895, when the drink of choice among miners and prospectors was raw potato spirit spiced with tobacco juice and pepper. It formed a new U.K.-based holding company in 1999, when it moved its main listing to London. Citigroup Global Markets Ltd., Morgan Stanley, and FirstRand Bank Ltd.'s Rand Merchant Bank are global coordinators and bookrunners for the placing. Tsogo's financial adviser is Deutsche Bank AG. Its South African legal adviser is Webber Wentzel, while Linklaters LLP is international legal adviser. PricewaterhouseCoopers LLP acted as independent reporting accountant to Tsogo Sun, while KPMG LLP was an independent expert.