What is it about the Cape gaming industry that brings out the fight in so many participants?
We’d guess that the rather large amounts of profits being spun from Cape casinos – most notably the GrandWest in Goodwood – is a major reason why no-one is keen to give an inch in what increasingly looks like a bun-fight for prospective long term positions.
At the end of 2005 (as documented in CBN earlier this year) we had feisty Cape Empowerment Trust (CET) going hammer and tongs against assurance giant Sanlam for control of Sancino Projects. Sancino, where Sanlam eventually won control, holds a 13% stake in Grand Parade Investments (GPI), which in turn holds a major stake in SunWest – the holding company for the GrandWest casino.
CET, which at one stage owned more than 50% of Sancino (only to be later diluted down to about 25% by Sanlam), did not surrender. Recently the revitalised empowerment group snapped up additional parcels of shares in Sancino from two empowerment groups.
While there is clearly a jockeying for „major shareholder“ status at GPI ahead of a mooted listing this year, it seems a real war has broken out between Sun International and Real Africa Holdings (RAH) over SunWest.
RAH, a former empowerment company, now holds as its main asset a number of interests in individual casinos operated and controlled by Sun International.
By far the biggest (and most valuable) stake owned by RAH is its more than 20% stake in SunWest, the operator of the GrandWest casino.
It is this holding in SunWest that is causing some tension, and this tension appeared to be heightened when Sun International launched an unsolicited bid to take over RAH in April.
While most of RAH‘s major shareholders are supportive of the takeover, it seems RAH‘s management do not fancy being swallowed up by Sun International at this juncture.
Not only have they asked the company’s shareholders to take no action in lieu of Sun International’s buyout offer, but RAH’s management hit the gaming giant with rather large legal punch.
The legal thrust by RAH revolves all around SunWest. Basically the dispute dates back to June 2003 when Sun International sold and transferred about 1.5m shares in SunWest (at R75 per share) to GPI and to a wholly owned subsidiary of GPI called Business Venture Investments No 575.
RAH alleges this transaction was in breach of the SunWest shareholders‘ agreement and articles of association. GPI is now clearly the empowerment partner of choice for SunWest, and observers expect the group to bolster its stake in SunWest in the months ahead.
Although Sun International also offered to sell and transfer 768 650 shares in SunWest at the same price to Afrisun, RAH contends that „unacceptable conditions“ were attached to the offer and that these conditions were in breach of the SunWest shareholders agreement and articles of association.
To cut a long legal story short, RAH contends the disputed transaction is void and is demanding that Sun International fulfils its obligations in terms of the SunWest shareholders‘ agreement and articles of association.
This entails an unconditional offer to sell and transfer a maximum of 768 650 SunWest shares to RAH‘s subsidiary Afrisun.
The shares in dispute represent 5.5% of SunWest’s issued shares – which makes the dispute rather significant. RAH is also claiming the dividends declared to date on the shares, which the company estimates at a not insubstantial R23 million. If Sun International play hard ball and decline to hand over the shares and dividends, RAH will claim damages to the tune of R327 million – a figure based on the market value of the SunWest shares in dispute as at June 2003.
At the time of going to press Sun International was snapping up as many RAH shares as it could get on the open market.
But if RAH can rally enough shareholder support to fob off Sun International’s hostile advances, things could get rather hot at SunWest in those cold Cape winter months.