• Minor moves to major in Africa

Minor International has signed an agreement with Sun International which will see it expand further into Africa.

The deal will mean growth for Minor International’s Anantara and Avani brands, while also giving Sun International a route into Asia.

Under the terms of the deal, Minor will pay Rand679.5m (USD63.9m) to purchase shareholdings in eight Sun International properties, in Botswana, Lesotho, Namibia, Swaziland and Zambia. Sun International will dispose of 50% of its interest in Zambia, and 80% of its interests in Botswana, Namibia, Lesotho, and Swaziland.

Minor International will also commit to invest into those operations that require refurbishment in the short to medium term. Sun International will use the proceeds from the sale to reduce its debt and, it said “provide capacity for its strategic expansion initiatives”.

Going forward, Sun International will continue to manage the casino operations, while Minor International will take on the hotel management, marketing and distribution of the hotels, with one of the hotels rebranded under the group’s Anantara brand and the remaining seven put under the Avani flag.

Minor International currently owns eight luxury game lodges and resorts in Kenya and Tanzania under the Elewana Collection flag, and five hotel projects in Mozambique under the Anantara and Avani brands.

Dillip Rajakarier, CEO, Minor Hotel Group, said: “Starting with the existing African Assets, it is the intention of the partnership to explore together other hotel and gaming opportunities that may arise in Africa and Asia, where Minor International would manage the hotel component and Sun International would manage the casino component.

The group has a total estate of 110 hotels and serviced suites under its own brands, in addition to Four Seasons, St. Regis, Marriott and Radisson Blu in its home market of Thailand, as well as in Australia, New Zealand, Maldives, Vietnam, the Middle East, Sri Lanka, China, Malaysia, Indonesia, and Cambodia. The group is one of Asia’s largest restaurant companies with over 1,500 outlets operating in 20 countries under brands including Dairy Queen and Burger King. For the full year last year it generated more than USD1.1bn in revenues, 49% of which came from the group’s hotels and mixed-use business.

The group has suffered in the wake of Thailand’s ongoing political upheaval. In the second quarter, the company’s hotels reported a 9% rise in revpar on the year. Excluding hotels in Bangkok, the year-on-year increase in revpar was 17%. Hotels in Thailand’s major tourist destinations outside of Bangkok continued to see revpar rising on the back of increases in average daily rates, while occupancy remained strong.

Hotels outside Thailand, the majority of which are Anantara hotels, recorded revpar growth of 50% year-on-year as a result of achieving higher occupancies and rate both in existing properties and new openings.

Looking ahead, the company was confident, commenting that, with “the improving political climate in Thailand, Minor International expects tourist arrivals to Thailand to rebound, which should lead to strong performance of its Thai hospitality portfolio in the second half of 2014”. At the time of going to press, the country’s king had endorsed General Prayuth Chan-ocha as the leader of the military coup as prime minister.

Brad Adams, Asia director at Human Rights Watch, said: “As both prime minister and junta leader, Gen. Prayuth can wield broad power without accountability. This marks a dark day for human rights and the future of democracy in Thailand.”

With the deal giving Minor International a route deeper into Africa, it also gives Sun International the opportunity to expand into Minor International’s domestic market of Asia. Sun International is also planning to add sites to its existing holdings in Latin America, where it has operations in Chile and new casino operations to be opened shortly in Panama. The group’s portfolio of hotel and casino properties, which it both manages and has ownership stakes in, is valued at USD2.3bn.

Graeme Stephens, Sun International CEO, said: “With Minor International now taking the bulk of management responsibility for the African assets, the proposed transaction allows Sun International and its management team to increase their focus on the core casino assets that are driving its financial performance and strategy.”

The deal is the latest in a series for Sun International, most recently selling a 14.9%

stake in its SunWest and Worcester casino and hotel businesses in South Africa, for Rand2,185m (USD208m) to Tsogo Sun. Commenting on that deal, and one to buy a stake in a slot machine company, Stephens said: “The transactions are consistent with Sun International’s long-term objectives of increasing its interest in key strategic assets, expanding into different product offerings and geographic regions, streamlining the corporate structure and enabling BEE (black economic empowerment) value creation.”

With the global hotel operators currently marching into Africa – most notably with Marriott International’s acquisition of Protea Hotels – anyone who can offer a home advantage is being sought out. With Sun International looking out of Africa, both Tsogo Sun and Minor International have benefited. Others might do well to knock on Sun’s door.

 

HA Perspective [by Chris Bown]: Sun is a casino operator first, and only really a hotel operator where it needs to build infrastructure to support the casino. And it is expanding its casino horizons outside Africa, with a need to reduce debts in order to help achieve those aims. Last month, it acquired Chilean gaming operator Monticello, for example, paying USD146m to get into the South American market. Hence the impetus to find a buyer for its African hotel assets.

Marriott’s Protea deal has undoubtedly focused the minds of other hotel groups looking to grab a slice of the hotel market in Africa. And Minor, with some experience already on the continent, were clearly among those looking. With cash ready to invest, the deal looks to give them a firmer base from which to expand.

While the South African properties were excluded from the deal, one other property specifically missing from the deal is the Federal Palace, in Lagos, where Sun has a 50% stake. The precise reason for its omission is not clear.

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