Business / Companies
African Sun rejects Econet
10 Jun 2011 at 05:23hrs | Views
ECONET Wireless Global (EWG)'s bid to take over Zimbabwe's largest hospitality group, African Sun Ltd, failed after the tourism group's key shareholders turned it down, businessdigest can reveal.
Had Econet's bid gone through, this would have given the telecommunications giant, led by business tycoon Strive Masiyiwa, control over Zimbabwe's hotel industry, given that it already has its foot in Zimbabwe's second largest hotelier, RTG.
Insiders within EWG's local operation ' Econet Wireless Zimbabwe Ltd ' said Masiyiwa met African Sun CEO Shingi Munyeza in South Africa early this year where they "extensively" discussed Masiyiwa's interest to acquire a significant stake in African Sun.
"He (Masiyiwa) said he was interested in buying a significant stake in African Sun due to its pan African drive and presence in a number of African countries," insiders said this week.
African Sun has a market capitalisation of about US$17,3m. But analysts say the hotel group is undervalued given its assets. The group runs Crowne Plaza Monomatapa, the Holiday Inn franchise in Zimbabwe and Elephant Hills Intercontinental in Victoria Falls, among other hotel properties in the country and on the continent.
Country risk issues around Zimbabwe have also not played in the group's favour.
"Of particular interest to him was Elephant Hills in Victoria Falls which he indicated he was prepared to list as one of his assets under his empires' balance sheet as soon as possible when he met Munyeza," sources said.
Sources said Munyeza and Masiyiwa met regularly by virtue of both being board members of the Christian Community Partnership Trust (CCPT).
CCPT is a Christian funding organisation founded in December 2005 by Masiyiwa, his wife Tsitsi, to support evangelism and discipleship efforts by church and church organisations working in the least evangelised rural areas of Zimbabwe.
"On this particular day, it was all about him (Masiyiwa) trying to put a foot in African Sun," sources said.
"African Sun advised Masiyiwa that it did not have any intentions to sell any of its properties. They however advised him to build hotels if he really was interested in entering the hospitality industry significantly. They gave him an offer to manage his hotels if he was to pursue the idea," sources said.
African Sun has management contracts in Ghana, Nigeria and Botswana.
Contacted for comment on Wednesday, African Sun said they could not comment on the issue as they were in a closed period.
Econet spokesperson Rangarirai Mberi had not responded to businessdigest's queries at the time of going to press.
Masiyiwa already has presence in the hospitality industry through a 33,4% stake in Rainbow Tourism Group held by different companies that are linked to him.
He is also expanding his wings in the telecommunications business in Africa and abroad. Econet Wireless Zimbabwe and Econet Wireless Capital, the group's investment vehicle, own a significant stake in Afre Corporation and Mutare Bottling Company, respectively.
Although Econet management said the group would dispose of noncore businesses after the dollarisation of the economy, the group is growing into other sectors and still holds on to such assets.
Econet Wireless Zimbabwe is likely to take over Afre Corporation should the group underwrite the life assurance group's planned rights issue.
Increased investment in infrastructure and growth in the number of subscribers saw the Econet's profit after tax rise 24,5% to nearly US$141 million in the year to February 28 2011.
The company invested US$270 million into network construction. This brings total investment by the company over the past two years to US$430,1 million, management said.
Interest cover at over 30 times of EBITDA (earnings before interest, taxation, depreciation and amortisation) showed that the company had strong cash flows to service its debt commitments. Econet recorded an EBITDA of US$242,7 million, a margin of 49% of revenue. The growth in EBITDA was US$63,5 million, representing a 35% growth from last year.
The company has also kept a consistent dividend policy since the adoption of multi currencies, a rare feat given that local companies are still reeling from undercapitalisation and effects of runaway inflation that bedeviled the economy in the last decade.
Had Econet's bid gone through, this would have given the telecommunications giant, led by business tycoon Strive Masiyiwa, control over Zimbabwe's hotel industry, given that it already has its foot in Zimbabwe's second largest hotelier, RTG.
Insiders within EWG's local operation ' Econet Wireless Zimbabwe Ltd ' said Masiyiwa met African Sun CEO Shingi Munyeza in South Africa early this year where they "extensively" discussed Masiyiwa's interest to acquire a significant stake in African Sun.
"He (Masiyiwa) said he was interested in buying a significant stake in African Sun due to its pan African drive and presence in a number of African countries," insiders said this week.
African Sun has a market capitalisation of about US$17,3m. But analysts say the hotel group is undervalued given its assets. The group runs Crowne Plaza Monomatapa, the Holiday Inn franchise in Zimbabwe and Elephant Hills Intercontinental in Victoria Falls, among other hotel properties in the country and on the continent.
Country risk issues around Zimbabwe have also not played in the group's favour.
"Of particular interest to him was Elephant Hills in Victoria Falls which he indicated he was prepared to list as one of his assets under his empires' balance sheet as soon as possible when he met Munyeza," sources said.
Sources said Munyeza and Masiyiwa met regularly by virtue of both being board members of the Christian Community Partnership Trust (CCPT).
CCPT is a Christian funding organisation founded in December 2005 by Masiyiwa, his wife Tsitsi, to support evangelism and discipleship efforts by church and church organisations working in the least evangelised rural areas of Zimbabwe.
"On this particular day, it was all about him (Masiyiwa) trying to put a foot in African Sun," sources said.
"African Sun advised Masiyiwa that it did not have any intentions to sell any of its properties. They however advised him to build hotels if he really was interested in entering the hospitality industry significantly. They gave him an offer to manage his hotels if he was to pursue the idea," sources said.
African Sun has management contracts in Ghana, Nigeria and Botswana.
Contacted for comment on Wednesday, African Sun said they could not comment on the issue as they were in a closed period.
Econet spokesperson Rangarirai Mberi had not responded to businessdigest's queries at the time of going to press.
Masiyiwa already has presence in the hospitality industry through a 33,4% stake in Rainbow Tourism Group held by different companies that are linked to him.
He is also expanding his wings in the telecommunications business in Africa and abroad. Econet Wireless Zimbabwe and Econet Wireless Capital, the group's investment vehicle, own a significant stake in Afre Corporation and Mutare Bottling Company, respectively.
Although Econet management said the group would dispose of noncore businesses after the dollarisation of the economy, the group is growing into other sectors and still holds on to such assets.
Econet Wireless Zimbabwe is likely to take over Afre Corporation should the group underwrite the life assurance group's planned rights issue.
Increased investment in infrastructure and growth in the number of subscribers saw the Econet's profit after tax rise 24,5% to nearly US$141 million in the year to February 28 2011.
The company invested US$270 million into network construction. This brings total investment by the company over the past two years to US$430,1 million, management said.
Interest cover at over 30 times of EBITDA (earnings before interest, taxation, depreciation and amortisation) showed that the company had strong cash flows to service its debt commitments. Econet recorded an EBITDA of US$242,7 million, a margin of 49% of revenue. The growth in EBITDA was US$63,5 million, representing a 35% growth from last year.
The company has also kept a consistent dividend policy since the adoption of multi currencies, a rare feat given that local companies are still reeling from undercapitalisation and effects of runaway inflation that bedeviled the economy in the last decade.
Source - AlphaMedia
