Sun International, a South Africa-based casino and hospitality company, entered the Chilean casino market in 2016 when it formed a joint venture with local casino operator Dreams. The merger of Sun International’s LatAm assets with those of Dreams resulted in the creation of Sun Dreams.
In 2017, Sun International announced that it would increase its stake in the joint venture to 65%. ISP, too, purchased a stake in the casino business that year. It has built a 35% stake in the Chilean casino operation since then.
The Dispute
Sun International said this past January that it had referred its Chilean partner to an international dispute resolution body after ISP had failed to complete a previously announced acquisition of a 14.94% stake in Sun Dreams for an estimated R1.5 billion.
Sun International’s announcement came just days after ISP said in a media release that it had approached the South African casino operator with a formal proposal to buy a 50% stake in Sun Dreams.
Sun International hit back by saying that it had not received a formal offer from its Chilean partner and that ISP had just made the latest of a series of “unsolicited” and “non-binding” proposals and its actions had caused speculation in its share price.
The dispute was expected to be heard sometime in 2021.
The Settlement
The two disputing parties now appear to have reached a settlement, which will see ISP close the previously announced deal for the purchase of a nearly 15% stake in Sun Dreams and would then buy the remaining 50% stake in the casino operator from Sun Latam, Sun International’s Latin American subsidiary.
Stiff competition in its domestic market, fewer casino licenses up for grabs, and financial difficulties experienced by patrons had prompted Sun International to pursue international expansion opportunities a few years ago.
However, its Chilean operation, Sun Dreams, faces a number of challenges in the local market, including the need to renew casino licenses as well as looming political and social reforms in Chile. In addition, Sun International said that it has been struggling to secure funding for a new casino project in the South American country, which has forced it to reconsider its presence in the Chilean market.
The impact of COVID-19 and the costs associated with potentially lengthy arbitration proceedings that are always surrounded by great uncertainty have eventually convinced the South African company to offload its stake in Sun Dreams when presented with an opportunity to do that “at an attractive value.”
The company said that it would use proceeds from the deal to settle a nearly us$40 million debt in Latin America. The rest would be repatriated to South Africa, it also revealed.
Source: GMB / Casino News Daily
