- April 7, 2014
- Posted by: admin
- Category: Tsogo Sun Holdings
TSOGO Sun has continued its drive to own the hotels it manages, having increased its stake in the bulked-up Cullinan Hotel joint venture with Liberty Group for a net cost of R760m.
Tsogo Sun last week said Liberty had sold some of its hotel assets to the companies’ joint venture, while Tsogo Sun had also raised its stake in the joint venture from 50% to 60%.
Tsogo Sun and Liberty have various hotel agreements — including the Cullinan joint venture, which holds three hotels, as well as agreements wherein Tsogo Sun manages Liberty’s hotels under Tsogo Sun’s brands for a fee. Tsogo Sun said on Thursday last week Liberty had agreed to sell four of its hotels to the Cullinan joint venture, while an additional hotel, which Tsogo Sun had rented from Liberty, would also become part of the joint venture.
Meanwhile, Tsogo Sun would increase its equity interest in Cullinan to 60% by subscribing for additional shares in Cullinan for R100m.
Cullinan would acquire the five hotels for a combined R1.37bn.
“The whole rationale behind this is Tsogo’s continued strategy that we like to own the properties that we manage. That’s effectively what we’re doing here — we’re buying up a 60% stake in the properties that we manage for them,” said Tsogo Sun CEO Marcel von Aulock last week.
The investment follows similar deals where Tsogo Sun has bought into assets it manages. In recent years, the company has bought the remaining 53% share of Hotel Formula 1 (now Sun1) that it did not already own.
It has also bought a 75% stake in Southern Sun Ikoyi in Lagos from the owners it managed the hotel for, as well as the Southern Sun Hyde Park for R130m — which it previously managed for Hyprop Investments. In Tsogo Sun’s gaming division, it has spent about R2bn in recent years on buying out minority shareholders in the Suncoast casino.
Mr von Aulock said it was far easier and less risky to buy operations already managed by the company, “because there is no due diligence risk”. The deals announced last week are subject to competition authority approval.
Source – BDlive 2014 – Nick Hedley