Chilean investment company Nueva Inversiones Pacifico Sur (IPS) has made a formal proposal to the board of tourism, leisure and gaming group Sun International, expressing its interest in making a firm intention offer to acquire 50.1% of its total ordinary shares through a partial cash tender offer of R22 a share.

IPS’s proposal also includes an offer to provide Sun International with interim liquidity support in the form of a bridge loan, which would strengthen Sun International’s balance sheet and address any of its immediate liquidity concerns.

If the partial offer is approved, this interim liquidity support would significantly strengthen Sun International’s ability to weather the uncertainty of Covid-19 in its key markets, while protecting shareholder value and preserving jobs, IPS said.

Another component of the transaction proposed by IPS is to support, and underwrite at least 50.1% of, a R1.2-billion rights issue following completion of the partial offer.

IPS proposes to deliver a firm intention letter in respect of the partial offer and the component parts above, to the Sun International board as soon as it is satisfied with certain preconditions that have been raised by the board.

The proposed offer by IPS is compelling and provides a win-win across stakeholder groupings, IPS said.

At a premium of 44.26% to Sun International’s June 22 closing share price of R15.25; 68.26% to the one-month volume weighted average price (VWAP); and 50.09% to the three-month VWAP, the partial offer provides existing shareholders with the opportunity to monetise a portion of their shareholding at an attractive price, should they wish to exit.

It also allows shareholders to participate in the future value creation of a recapitalised Sun International should they wish to remain invested.

“Our proposed offer builds on the relationship that we have had with Sun International since 2016 and our aligned values. Like Sun International, we have a vision of providing world class entertainment through prime infrastructure and excellence in service, coupled with a strong commitment to responsible and sustainable gaming.

"To us, this proposal represents an opportunity for a strategic long-term investment in an industry that our business knows well while at the same time safeguarding Sun International’s balance sheet and preserving jobs,” IPS co-founder and chairperson Claudio Fischer said.

“We believe our proposed offer is compelling and have written to the board to consider proceeding with us, as we believe Sun International has an attractive portfolio of properties in Africa and Latin America which need to be protected against the devastating economic impact of the Covid-19 pandemic,” he added.

The proposal represents an alternative transaction structure with more favourable terms than those included in Sun International’s general meeting circular, dated June 12, posited IPS, indicating Sun International’s intention to launch the proposed rights offer.