African Sun disposes 12% stake in Dawn Properties

Published: 03 October 2013

HOTEL group, African Sun Limited has sold its 12 percent stake in Dawn Properties to Lengrah Investments, a subsidiary of Brainworks Capital for $4,3 million.

Prior to the transaction, African Sun had 28 percent shareholding in Dawn Properties.

The transaction was effected on the ZSE on September 17 this year at a price of $0,147 per share.

"The disposal was undertaken solely for the purpose of reducing short-term debt, pursuant to the ASL's strategic thrust of strengthening the group's capital structure as communicated previously," African Sun said in a statement yesterday.

African Sun bought the shares last year last year for about $3,71 million or $0,01259 per share.

Thus the transaction price of $0,0147 per share represents an effective 53 percent premium on the 30-day volume weighted average price of Dawn Properties shares as at August 21 this year, resulting in a cash profit of about $503 000 on the original purchase price of these shares.

"This disposal achieves ASL's commitment of reducing net debt to below $10 million by December 2012," said African Sun.

"This is the first phase of the reduction. Net proceeds from the disposal will be applied entirely towards reduction of short-term debt."

This will reduce African Sun's finance costs by $70 000 a month going forward. It will also reduce the company's total short-term debt by 32 percent from about $12,39 million reported for the six months ended March 31, 2013.

The disposal has triggered a mark down of the entire class of the shares held, which could potentially result in a charge of $8,77 million to the income statement for the year ended 30 September 2013, subject to further assessment of the value-in-use of this investment.

"The benefits that will accrue from the disposal of the shares, of debt reduction for ASL far outweigh the marked down charge that will be suffered in the current financial year," said African Sun.

African Sun recorded a 65 percent increase in core earnings from $3,5 million as at March 31, 2013. The group expects the growth to be sustained until year end.

Brainworks Capital - a private equity investment and advisory firm has also acquired a beneficial shareholding in African Sun Limited through numerous investment vehicles.

"The benefit of disposing the shares to Lengrah (which is a subsidiary of Brainworks Capital) is the fact that the major shareholder of the holding company Brainworksis African Development Cooperation - which will assist with capital raising for ASL as well as positioning the group to tap into international markets," said African Sun.

Brainworks arranged the funds used by African Sun to acquire the disposed 12 percent stake in Dawn Properties last year.
- herald