Proposed R9.5 Billion Sun International Merger Stutters off the Roll

Sun International Merger Stutters off the RollEarlier this week, further to our earlier report in March 2015 (Sun International in R9.5bn Acquisition Deal with Peermont), equally dramatic events unfolded that saw the highly anticipated proposed merger between Maxshell 114 Investment and Sun International scrapped from the roll. Sun International, together with the decisive controlling shareholder of The Peermont Global Group. The Peermont Global Group along with Maxshell 114 Investments, informed the South African Competition Tribunal this past Tuesday at the pre-hearing that uncertainty existed regarding their proposed merger.

The anticipated merger would have allowed the globally recognised casino & hotel group,Sun International to acquire Peermont & Maxshell’s entire shareholding for R9.5 billion, thereby incorporating the two companies as wholly owned subsidiaries of Sisa. The Peermont Group, as a hotel and casino operator that controls and manages seven South African based casinos.

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The Competition Commission prohibited the merger, mainly after finding that the completion of this transaction prohibits healthy competition within the central market areas of Gauteng. Reportedly, this ruling made on a basis of just one amongst a number of other things, reasoned there might exist cause to allow coordination of behaviour to the disadvantage of consumers. The Competition Commission stated that its members could not accept the proposed behavioural remedies offered by both parties involved in the acquisition.

Since these early reports the Tribunal announced the proposed dates for the next hearing have been removed from its hearing role with the timetable for the next hearing completely suspended. Subsequently, the Tribunal directed the merging parties that if they became aware that this proposed merger transaction will not take place, the entities should file for the suitable notice.

Michael Farr, Sun International Group GM for communications and corporate brand, made it known that receiving approval from the Tribunal always remained one of the conditions precedent to their proposed procurement transaction, which is under requirement for fulfilment by 31 March 2016, which can also be referred to as its long stop date. Farr continued by stating that given the time they were allowed for their tribunal hearings during June 2016, it made it impossible to meet the condition precedent by its long stop date.

Farr finished off his commentary by revealing that consequentially it is now anticipated that this transaction will be terminated on its long stop date and they were in the process of negotiating on a cash settlement for the Menlyn Maine not with an early proposal at R675 million by 30 April to settle all claims.

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