Gaming roots revisited
GRAND PARADE: EXITS FOOD AFTER UNBUNDLING ITS INTEREST IN SPUR
GPI had its fair share of challenges with the food business.
JSE-listed empowerment investment holding company Grand Parade Investments (GPI) is returning to its initial roots to focus only on its gaming investments.
This follows GPI exiting its food businesses after unbundling its interest in Spur Corporation, selling Burger King South Africa and its loss-making stainless-steel catering and refrigeration equipment manufacturer Mac Brothers in voluntary liquidation.
The unbundling of Spur, announced this week, involves the distribution of GPI’s 8 447 731 Spur shares, valued at more than R170 million at the current Spur share price, to GPI shareholders.
Not a surprise to shareholders
GPI CEO Mohsin Tajbhai said the company did communicate to shareholders in 2019 that it was on a drive to unlock value through a controlled sale of assets and was going to exit its food businesses.
Tajbhai said GPI was a successful gaming business initially and ventured into foods, where it had a fair share of challenges. He said the unbundling of Spur marks its complete exit from foods.
“We are now back to our roots. Over that period, we have also reduced debt, reduced head office costs and are essentially back to where we were before.
“We have got access to two of the best performing casinos in the country, we have a very low head office cost, we have low debt levels, and whatever dividends we receive from gaming now will be passed on to shareholders and management is still committed to unlocking value,” he said.
GPI is now left with its 15% interest in Sun West, 15% interest in Golden Valley Casino and 30% interest in Sun Slots.
Sun West operates Cape Town’s Grand West Casino complex in Cape Town.
Tajbhai admitted GPI’s first option was to sell its Spur interest but a sale would’ve had to have been at a significant premium because Spur, in GPI’s view, is trading below fair value.
He said if GPI had sold its Spur interest at current share price levels, certain shareholders would have questioned why it had not waited and got more for it.
“We wouldn’t want to prejudice our shareholders. We were looking to try and sell at a significant premium. Unfortunately, we weren’t able to close the deal.
“By unbundling we leave the decision with the shareholders on what they want to achieve. We are not here to time the market,” said Tajbhai.
Spur share discount
“The unbundling also achieves our goal of unlocking value because the Spur shares that were held through GPI are at a discount, in excess of 20%, so [with] the unbundling of those shares [they] are now valued at market value,” he added.
Tajbhai is bullish about the future of GPI’s gaming interests.
“Sun West has done incredibly well. It’s been very resilient to the pandemic and now, with the restrictions having been lifted, we are seeing people getting back to casinos.”