SABMiller plc says it will sell a $1.09 billion stake in South African hotel and casino operator Tsogo Sun Holdings Limited, as the world’s second-biggest brewer looks to bolster beverage operations in Africa.
Tsogo Sun has more than 90 luxury hotels in seven African countries including Nigeria and the Seychelles.
Following a review of its 39.6 percent holding in the Johannesburg-based company, SABMiller will divest the stake in a two-stage transaction involving a sale to institutional investors and a buyback of shares by Tsogo Sun, the maker of Peroni and Castle Lite said in a statement.
The beverage maker generates almost one-third of its earnings from the African continent, and South Africa is the second-biggest provider of the company’s revenue after Latin America.
It struggled to grow in South Africa last year amid rising inflation and increased competition from Heineken NV and Diageo plc, while expansion across Africa has been hampered by tough economic conditions in South Sudan and Zimbabwe.
In addition to protecting market share in South Africa, “there remains a lot of white-space opportunity for them in Africa as well,” Philip Gorham, an analyst at Morningstar, said in an e-mail. “Kenya is an opportunity. Their presence is quite patchy, and they could look to plug some geographic gaps.”
Since taking the helm last year, SABMiller CEO Alan Clark has sought to offset declines in Europe and a difficult US market by cutting costs and targeting developing economies across Latin America and Africa.
SABMiller gets more revenue from developing regions than other major brewers.
“Gaming and hotels are not core to our operations and we have concluded that the time is right for us to exit our investment,” Clark said in the statement.
SABMiller shares fell 0.9 percent to 3,368.5 pence as of 1:19pm in London on Monday. Tsogo Sun declined as much as 7.4 percent, the most on an intraday basis in more than a year, and traded 2.8 percent lower at 26.15 rand in Johannesburg, giving the company a market value of 30.9 billion rand ($2.9bn).
“We support Tsogo Sun in buying back the shares,” said Johnny Copelyn, CEO of the casino operator’s biggest shareholder Hosken Consolidated Investments Ltd., which now owns 47 percent of the company. “It’s a good company. The industry has a good future,” he said.
SABMiller said in April it was considering options for the stake. The possibility that the brewer could sell its holding increased after SABMiller merged Tsogo Sun with Gold Reef Resorts Ltd. in 2011, a transaction that reduced its stake from 49 percent.
