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Happiness Zengeni Business Editor
PRIVATE Equity investment firm Brainworks Capital is set to make a mandatory offer to all listed African Sun shareholders. This is after the group recently completed an acquisition of 36,51 percent of the total shares amid indications that the hotel group together with its landlord Dawn Properties are set to be combined back into one entity.
The offer is being made to comply with Chapter 9 of the Zimbabwe Stock Exchange listing requirements which compels shareholders to make a mandatory offer to minorities once their shareholding passes the 35 percent level.
Brainworks acquired a shareholding in African Sun through a share-swap deal with former controlling shareholder Mr Shingi Munyeza.
The remaining two tranches of the transaction made up of 29 million shares and 14 million shares were completed in the past two weeks.
African Sun is expected to issue a cautionary statement on the take-over.
The firm also completed transactions in Dawn Properties after the disposal of a 12 percent shareholding or 294 705 134 shares by African Sun at a 53 percent premium from the last trading price at US1,47c, through its subsidiary Lengrah Investments.
Brainworks went on to raise its stake last week in a book-over on the stock exchange to 16 percent. This means that African Sun together with Brainworks now control 32 percent of Dawn.
If they increase it above 35 percent they will be forced to make another mandatory offer to minorities and delist the group if that is successful.
Well-placed sources told the Herald Business that pieces of the deal are coming together with the intentions of Brainworks pointing to a re-bundling of Dawn and African Sun. African Sun unbundled Dawn in an effort to unlock value in its properties but wrangles between the two started in 2010 when the hotel group tried to register a US$12 million bond over Crowne Plaza Monomotapa without board approval.
In 2012 former chief executive Mr Mike Manyika left the group after an acrimonious year in which he tried to evict African Sun from eight hotels citing breach of the lease agreement.
With a lack of collateral, African Sun has been struggling to refresh its product and has been saddled with short term debt. However, with the coming on board of Brainworks, African Sun has been able to restructure its debt while the private equity firm is expected to unlock further value by raising international capital for the group.
The disposal was in line with African Sun’s target of reducing the net debt to below US$10 million. Net proceeds from the disposal will be applied entirely towards reduction of short-term debt with the following benefits expected to accrue to the company.
Analysts say if Brainworks is to emulate the Ecobank deal where the then Premier Bank partnered with a reputable foreign institution, then African Sun can only benefit from the group’s international exposure.
The main African Sun deal held two investors, one from Australia and one from New Jersey. Both investors are said to be experienced entrepreneurs in the hotel sector. They are expected to lead a technical team which will work together with Mr Munyeza to expand and create value for shareholders.
Brainworks have also raised international capital for BancABC through the African Development Corporation. ADC’s activities in growth markets align to African Sun’s regional activities. It is expected that ADC will play a key role in bringing in new hotel developments through its linkages.
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