Sun shares surge as group sells its 64.94% majority stake in Latam operation

SUN INTERNATIONAL’S share price rose more than 9 percent on the JSE on Friday after the hotel chain and casino company agreed to sell its 64.94 percent majority stake in Latin American (Latam) operation Sun Dreams for $160 million (R2.75 billion) and settled the dispute with its partner, Nueva Inversiones Pacifico Sur.

Sun International’s subsidiary, Sun Latam, in Chile entered into a share purchase agreement last year with Pacifico for the sale of 14.94 percent of Sun Latam’s shareholding in Sun Dreams for $85.8m, resulting in each party holding a 50 percent equity interest in Sun Dreams.

But the two parties have been embroiled in a dispute regarding the initial transaction, and Sun Latam initiated arbitration proceedings against Pacifico before the International Chamber of Commerce in Chile to resolve the dispute.

On Friday, the parties reached a new agreement following the impact of the Covid-19 pandemic on the group and taking into consideration the challenges facing Latam and South Africa, the length of time, uncertainty and costs associated with arbitration proceedings in a foreign country.

Sun International’s share price surged to R12.46 a share in the afternoon after the agreement was announced, up from Thursday’s closing price of R11.26. The share closed up 9.24 percent at R12.30.

But the stock has lost about 41.6 percent since the beginning of the year as Covid-19 forced the hotel and tourism industry to stop operating in an effort to contain the spread of the virus.

Sun International announced a R1.2bn rights offer in June in an effort to improve its liquidity and strengthen its balance sheet in response to the Covid-19 outbreak.

“The proceeds from the settlement payment will be used to settle and extinguish Sun International’s offshore debt in Latam of $38.3m, with the balance being repatriated back to South Africa,” the group said on Friday.

Lee-Anne Bac, a director at BDO Advisory, said the move to lockdown level 2 would go a long way in helping to restore the travel and tourism sector in South Africa.

“Is it good enough for the industry to function fully? Absolutely not, but some business is better than none. But the good thing about opening up to domestic leisure travellers is that we can showcase how our travel and tourism sector has adopted the necessary protocols to operate safely in these Covid-19 times. This will stand our country in good stead when international borders do open, which will be soon, hopefully,” Bac said.