Hosken, Tsogo deal heats up

Focus on gaming assets

EMPOWERMENT conglomerate Hosken Consolidated Investment (HCI) yesterday said it was a step closer to consolidating its gaming assets under Tsogo Sun in a R2.1 billion deal that would see the hotel and entertainment group take over Niveus Investments gaming machine and bingo hall businesses.

The deal would see Tsogo acquire all Niveus interests in gaming machine operator, Vukani Gaming and bingo hall operator Galaxy Bingo.

HCI said the basis of the proposed transaction was to consolidate its gaming interest under a single business.

“The consolidation of HCI’s gaming interests consists of the sale by Niveus of all its interests in Vukani Gaming and Galaxy and all their associated entities, trusts and businesses (collectively called “Gameco”) to Tsogo,” the company said.

Both Tsogo and Niveus are majority owned by HCI.

Under the terms of the proposed deal, 93 percent of Niveus interests in Gameco would be distributed to Niveus shareholders, cutting HCI’s interest in Gameco after the distribution to 225 million shares.

In addition, Tsogo will, in terms of the minority offer, provide a “cash based alternative” to the minority shareholders, other than Niveus, pursuant to which such shareholders will be entitled to elect to dispose of their Gameco shares for a cash consideration of R9.74 per Gameco share.

HCI said the aggregate value of the Tsogo consideration shares was approximately R2.1bn.

Niveus said the planned unbundling granted its shareholders more flexibility to manage their interests in the company and Gameco.

“The rationale for the proposed unbundling of Gameco to the current Niveus shareholders is to offer Niveus shareholders the opportunity to separately retain, dispose of or increase their interest in the gaming businesses without affecting their current interest in the other assets held by Niveus,” the company said.

Niveus said Vukani operated 5 341 limited payout machines while Galaxy operated 1 886 electronic bingo terminals.

Tsogo said the proposed transaction was subject to the fulfilment, or waiver by the parties by not later than end of July.

However, the proposed deal brought into question the future of Niveus.

Last year the company also disposed of its wine and spirits producer KWV to unlisted UK-based Vasari for R1.1bn.

Niveus would now hold a significant minority shareholding in Tsogo Sun, a sizeable cash holding and the old KWV property assets, mainly Laborie and La Concorde, as well as valuable South African art works.

This has given rise to speculation that HCI is planning to buy out minority shareholders and delist the company from the local bourse.

The company only listed on the JSE in 2012.

In contrast, Tsogo has in recent years been strengthening its hand as a giant in the hotel and hospitality sector.

Earlier this month, the company said that the construction of its 19-storey, R700 million hotel in Cape Town had entered its final stages and it was expected to be completed by September.

Tsogo said in 2015 that it was considering creating an entertainment and hospitality focused Real Estate Investment Trust for its hotel, retail and office property portfolio.

In its Gambling Outlook 2016-2020, PricewaterhouseCoopers, said the gambling industry continued to grow from a revenue perspective.

The report found that gross gambling revenues for casinos, limited payout machines, bingo and betting totalled R26bn in 2015, an increase of 11.2 percent from the prior year.