ASL, Dawn close acquisition deal

LIVINGSTONE MARUFU

African Sun Limited’s (ASL) proposed acquisition of the entire issued share capital of Dawn Properties closed this week after the property concern’s shareholders approved the deal to reverse the demerger done 17 years ago.

The approval at an extraordinary general meeting held virtually on Monday comes a week after ASL’s shareholders gave the transaction the nod which will see Dawn become a unit of ASL, 17 years after the demerger to create shareholder value.

However, Zimbabwe’s capital markets regulator, the Securities and Exchange Commission of Zimbabwe (SECZ) is investigating the transaction between ASL and Dawn after the deal was questioned by analysts who said if it goes through, it will prejudice the minority shareholders.

SECZ said it was stepping in to protect minority investors in line with Section 4 of the Securities and Exchange Act.

Speaking at the Dawn’s virtual extraordinary general meeting (EGM), company secretary Markus de Klerk said there was need for the company to be taken over, a move likely to help the company weather the difficult operating environment.

“We hereby announce the approval of the proposed transaction, being, the offer made by ASL to acquire up to 100% of the issued share capital of Dawn Properties Limited by means of a share swap through the issuance of 616,129,718 new African Sun Limited ordinary shares to Dawn Shareholders at a swap ration of 1 African Sun Limited ordinary share for every 3.988075946,” de Klerk said.

“Dawn Shareholders who accept the offer will become Shareholders in African Sun Limited and Dawn Properties Limited may become a subsidiary of African Sun Limited, and otherwise for the implementation of the Transaction described in the Circular to Shareholders be and is hereby approved.

This has passed 96.11% inclusive of major shareholders Arden Capital Limited while 86.15% without them.”

At the same meeting, Dawn Properties minority shareholder Elijah Chingosho raised questions around the ratios used on the share swap arrangement of the transaction and was not in agreement of the takeover.

de Klerk said the ratios were reached after a valuation of the businesses and two financial advisors from both parties eventually agreed on the ratio to be used.

Dawn Properties are the current owners of properties leased to ASL and its portfolio consist of Caribbea Bay Sun Hotel, Monomotapa Hotel, Elephant Hills Resort and Conference Centre, Great Zimbabwe Hotel, Holiday Inn Mutare Hotel and Hwange Safari Lodge.

The deal comes as ASL has fully integrated and taken over the management of its hotels which were previously put under third party management by South African group Legacy Hospitality Management Services Limited (Legacy).

ASL, last year, terminated a deal it entered into over three and a half years ago with Legacy to manage five of its local hotels.

It was touted as the best move towards improving profitability, growth and visibility of the hotels in September 2015.

ASL said the full integration of the business, expected to be achieved within two years, would enhance African Sun’s earnings per share gives the group full control of the freehold title of the seven (7) hotels it currently leases from Dawn.

“With no rental payments, the liquidity improves at African Sun allowing better management of working capital,” the group said in a circular to shareholders, adding that the group will have a structure that allows them to attract investment (debt or equity) on a property by property basis.

African Sun said the transaction will be financed by equity hence limiting its cash outlay.

The acquisition of Dawn, the group said, envisages a growth in net asset value to ZWL$1.2787 from ZWL$0.099.

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