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M&A ON FIRE DESPITE LACKLUSTRE ECONOMY

Round up of SABMiller, Tsogo Sun, Anglo American and De Beers corporate activity.

JOHANNESBURG – After weeks of doom and gloom on the local economic front it’s refreshing to see that the M&A industry is quietly getting on with business. This week saw the announcement of several large deals.

In April SABMiller flagged the investment community that it was conducting a strategic review of its R11.7 billion investment in Tsogo Sun. It announced this week that it would dispose of its 39.6% stake through two conditional transactions; a secondary placing of up to 305 million shares to selected local and international institutional investors and a specific repurchase of shares by Tsogo Sun for R2.8 billion.

There is no predetermined split on what is to be offered to local and foreign investors in the secondary placing. It is expected, however, that since Tsogo Sun is a South African company, the majority of interest will be from local institutions though there is growing offshore interest in local gaming stocks. The book runners are confident that there will be no overhang in the market and that the shares will easily be placed. While this is a big deal for Tsogo Sun, it is a relatively small investment in SABMiller’s portfolio.

Tsogo Sun will repurchase and cancel a minimum of 130.2 million shares to be funded through existing cash reserves and debt facilities. Considering that 80.9% of the company is currently held by SABMiller and HCI subsidiary Tsogo Investment, this move will substantially improve liquidity levels and by virtue of the reduced number of shares in issue after the repurchase, the size of HCI’s 41.3% stake will increase. Efforts to get comment from Tsogo Sun management proved difficult – both the CEO Marcel von Aulock and CFO Rob Huddy were in London – ironing out the details with SABMiller no doubt.

Source: Moneyweb – Marylou Greig