Kasada Albatross Holding, a Mauritius-based subsidiary of Kasada Hospitality Fund LP, is set to buy Southern Sun Ikoyi from Tsogo Sun Hotels in a US$30.4 million deal.
The acquisition deal is now at an advance after a Sale of Shares Agreement between Southern Sun Africa (SSA) and Kasada Albatross Holding, which requires SSA to dispose of all of its sale shares in its wholly owned subsidiary, Southern Sun Ikoyi Holdings (SSIH) together with all shareholder loan claims against Ikoyi Hotels Limited (IHL) to the purchaser.
As at March 31, 2022, the value of the net assets of IHL was US$ 41.0 million while Southern Sun Africa Group’s 75.55 percent share of IHL’s net asset value equates to US$ 31.0million
According to a release by JSE SENS Department, the information dissemination service of Johannesburg Stock Exchange (JSE Limited), the largest stock exchange in Africa, on the Sale of Shares Agreement on May 26, 2022, the US$30.4 million purchase, comprised of US$29.1 million for the Sale Shares and US$1.3 million for the Sale Claims.
Explaining the rationale for the sale, JSE SENS Department noted that since its separate listing, Southern Sun Africa has been looking for ways to reduce its US dollar denominated interest-bearing debt (offshore debt) as COVID-19 limited the Group’s ability to apply its cash resources towards the settlement of debt.
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“The Disposal Consideration allows the Group to achieve this objective and to divest from its shareholding in IHL, which is an acceptable outcome. The successful implementation of the Disposal would result in the reduction of Offshore Debt through the deconsolidation of IHL’s External Debt of US$12.8 million and provides SSA with sufficient cash resources to offset Offshore Debt in Mozambique amounting to US$26.6 million, thereby eliminating the forex risk to the Group”, JSE SENS Department explained.
Explaining further, JSE SENS Department said with US$30.4 million from Kasada Albatross Holding, SAA will pay off its offshore debts of US$6.4 million and US$26.6 million in Mozambique.
However, the purchase is subject to the fulfillment or waiver of some conditions including; unconditionally approval by the Federal Competition and Consumer Protection Commission (FCCPC) in Nigeria for the implementation of the sale of the Sale Shares from the Seller to the Purchaser, termination of hotel management agreement between SSA and Ikoyi Hotels Ltd, while Absa Limited, the third party provider of debt financing to IHL, must approve the sale of the Sale Shares in writing, and agreed to release Southern Sun Hotel Interests (Pty) Ltd, Southern Sun Offshore (Pty) Ltd and Tsogo Sun Investments (Pty) Ltd from all existing security and/or encumbrances created in its favour relating to the Sale Shares.
But some stakeholders in the Nigerian hospitality industry have different views on the proposed acquisition.
Vincent Monye, a hotelier, is worried that Tsogo Sun is a better brand and the acquisition might result in a new manager that will make a mess of all the gains by the Southern African owner and manager.
He noted that the hotel did not do well under Ikoyi Hotel until Tsogo Sun acquired it and hence a manager in the capacity of Tsogo Sun when the would-be new owner eventually finished the acquisition process.
Jude Adim, a hotel manager, said that the acquisition would impact the industry negatively as the new owner will definitely get a new manager.
