Sun International (SI), along with SA's other gaming companies, has black partners as a prerequisite for gaining gaming licences, but these partnerships have usually occurred at a regional, rather than at a group level. And though SI has made huge progress on all aspects of the black economic empowerment (BEE) scorecard, it was keen to make a meaningful impact on the equity ownership front. Late last year SI announced it had secured a BEE deal at corporate level, becoming a truly empowered company.
This broad-based BEE transaction will result in 7% of SI's issued share capital being owned by a group of historically disadvantaged individuals, including the group's staff and black management. The deal forms part of Sl's empowerment undertaking to the North West Development Corp in 2003 and will take black ownership in the group's operations to more than 25%.
The entry point into SI will be a new company called Dinokana, whose main shareholders (28,05%) will be Lereko Investments, led by Popo Molefe, Valli Moosa and Lulu Gwagwa. Moosa and Gwagwa will be nominated by Lereko to represent Dinokana on the SI board.
Though Moosa and Molefe were formerly in government, they've both been out of politics for about 18 months. Neither of them held gaming-related positions while in government.
Molefe says: "This is a long-term investment and the terms of the deal mean Dinokana will not dispose of its shares for nine months. The SI shares held by Dinokana carry full voting rights and full rights to participate in dividends. Dividends received by Dinokana will be used to service the dividends and capital on the preference share funding.
"This initiative by SI speaks volumes for its commitment to economic equity and sets an example for others to follow."
The effective 7% shareholding is valued at about R604m and will be acquired by Dinokana for R392m with preference share funding raised through Nedbank. The balance between the acquisition price and the value of the shareholding is about R216m and represents a one-off, upfront cost to SI shareholders.
SI chief executive designate David Coutts-Trotter says empowerment has been an integral part of SI's business strategy, particularly with respect to new casino licensing and bidding processes.
"This is a significant step forward in the transformation of our leisure industry in SA. Moreover, it is demonstrative of our commitment to a new order in the ownership of tourism, leisure and entertainment assets in this country. We view BEE as a value-creating strategy, designed to create realistic, meaningful and enduring partnerships. SI believes effectively and properly implemented BEE will be a key driver of sustainable economic growth and transformation in SA."
SI has been at the forefront of BEE in the leisure industry, with all new casino operations being owned in partnership with empowerment groupings. "The shares in Dinokana have been allocated specifically to parties with a link to the North West Province, as well as a large portion to SI's current and future employees and black management. SI has structured the proposed BEE transaction with a broad base focused on the North West Province," says Coutts-Trotter.
In another development, SI has announced the start of work on its latest casino in SA, at Worcester in the Western Cape. The Worcester casino is expected to open its doors in September 2006, at a projected cost of R156m.
SI will develop and manage the complex. It has 40% of the equity, of which 3,5% will go to employees at the complex. Grand Parade Investments and other empowerment shareholders, including the Breede River Valley Community Trust, own the balance of the equity.
