AFRICAN Sun Limited (ASL), the country’s largest player in the hospitality sector has sold part of its equity in Dawn Properties Limited to Lengrah Investments (Private) Limited, the Financial Gazette can report.
Lengrah Investments, a hotel and real estate investment company which is a subsidiary of Brainworks Capital, acquired a 12 percent stake in the listed property company for about US$4 million.
ASL had previously held a 28,54 percent stake but will now remain with 406 466 976 Dawn Properties shares, which constitute 16,54 percent of the total issued shares in the property company. The transaction was undertaken for the purpose of restructuring ASL’s balance sheet, which will see proceeds from the disposal going towards the reduction of the company’s short-term debt by 32 percent from US$12,39 million reported for the half year to March 31, 2013.
It will also result in the reduction of finance costs by US$70 000 a month going forward.
The deal has already been effected on the Zimbabwe Stock Exchange at a price of US$0,147 per share.
On Tuesday, ASL chief executive, Shingi Munyeza confirmed the development.
“African Sun disposed of 294 705 134 Linked Units in Dawn Properties Limited for a consideration of US$4332165 to Lengrah Investments (Pvt) Limited. Net proceeds from the disposal will be applied entirely towards reduction of short-term debt,” he said.
“The benefit of disposing the shares to Lengrah Investments is the fact that the major shareholder of the holding company, Brainworks, is African Development Bank which will assist with capital raising for ASL as well as positioning African Sun to tap into international markets,” he added.
The 12 percent stake, which is the subject of this disposal was acquired for about US$3,7 million at the height of a board wrangle with Dawn over hotel lease agreements last year.
The wrangle started after the collapse of ASL’s US$10 million deal with the Industrial Development Corporation of South Africa. The deal collapsed because Dawn vetoed ASL’s bid to pledge Crowne Plaza Monomotapa as collateral in the transaction.
Analysts say the transaction could cause gridlock in the management of the landlord/tenant relationship between the two companies but Munyeza argues that: “Significant progress has been made in this regard and a cordial business relationship now exists between the two entities”.
“Mr George Manyere, an appointee of African Sun Limited onto the Dawn Properties Board is a director of both Lengrah Investments and Brainworks Capital (Pvt) Limited.”
Formerly a wholly-owned subsidiary of ASL, Dawn Properties owns several of the hotel group’s properties which include Crowne Plaza Monomotapa, Carribea Bay, Elephant Hills Resort, Holiday Inn hotels in Beitbridge and Mutare and Hwange Safari Lodge.
In its half year financial results to March 31, 2013, ASL’s revenue grew by two percent to US$26,60 million in comparison to US$26,19 million for same period last year.
The group recorded a profit before tax of US$1,23 million from a profit of US$1,50 million in the prior period.
Earnings before interest, tax and amortisation grew by 65 percent to US$3,59 million from US$2,17 million in prior year attributable to an improvement in Average Daily Rate and cost efficiencies realised in the period under review.
The company expects this to be sustained through the remainder of the full year
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