…As African Sun eyes 100% equity in property concern
BUSINESS REPORTER
African Sun Limited will offer one share for every 3.988075946 existing Dawn Properties shares as it moves to wholly own the real estate investment holding, development and property consulting concern.
The transaction, which requires shareholder approval at an extraordinary general meeting of shareholders on October 13, will result in Dawn delisting from the Zimbabwe Stock Exchange (ZSE).
The transaction will be done via the issuance of 616,129,718 new African Sun ordinary shares, that will be listed on the ZSE, for 2,457,172,108 shares in Dawn representing 100% of the issued shares, according to a circular dispatched to African Sun shareholders.
JSE-listed Arden Capital has majority shareholding in African Sun and Dawn owning 57.67% and 66.81% respectively.
In a circular to shareholders, African Sun said the implementation of the proposal will consolidate the hospitality group’s position as the largest provider of hospitality services in Zimbabwe.
It 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 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.
It said cost savings will be unlocked after the acquisition as the current structure of two listed companies creates material cost duplication to achieve the same objective.
“Cost savings will be achieved mainly from the rationalisation of structural efficiencies removing duplication, increased procurement efficiencies, the sales and distribution function and of its brand marketing functions and administrative and head office function,” African Sun said.
In a letter to shareholders, African Sun board chairman Alex Makamure said the demerger of the businesses of African Sun and Dawn in 2003 did not bring the desired results.
He said the shareholders in African Sun were of the view that the hotel assets were not sufficiently factored into its share value, and that a demerger would result in a favourable sum of the value of the parts from a valuation point of view.
Makamure said it was anticipated that a demerger would be efficient and result in making both African Sun and Dawn attractive for investors who wanted to invest in specific assets and operations and that the resultant structures would attract debt funding.
But he said none of the anticipated benefits had materialised 17 years later.
“With the advent of the Covid-19 pandemic, the impact on the businesses of both African Sun and Dawn has been devastating, due to the non-pharmaceutical initiatives that have been adopted by virtually all countries globally, including a raft of measures prohibiting international, national, regional and intercity travel, and generally, the free movement of people,” Makamure said.
“This has resulted in the total collapse of the aviation and tourism sectors, with estimations that tourism in Africa will reduce by over 50% in 2020; nevertheless it is expected that Zimbabwean tourism will rebound in the second quarter of 2021 and is likely to positively affect African Sun’s operations.”
