Desert Inn buyer to go private

Wednesday, Jan. 19, 2000 | 11:02 a.m.

SUN STAFF AND WIRE REPORTS

Sun International Hotels Ltd., the resort operator buying the Desert Inn in Las Vegas, said today its controlling shareholders have offered to buy the 47 percent of the company they don't already own for $378.7 million.

Sun International Investments Ltd., which holds about 17.8 million of the company's 33.57 million shares, offered $24 a share in cash for the remainder.

The offer, a 24 percent premium to Sun International Hotels' closing price Tuesday, drove the stock higher today. Sun International Hotels (SIH) stock was quoted at $22.75, up $3.4375 or 17.8 percent, in early afternoon trading after opening nearly an hour late.

The company said it will form an independent board committee to consider the offer, and that Sun International Investments (SII) won't consider a sale to to another bidder.

SIH also reported fourth-quarter net income slipped to $11.3 million, or 34 cents a share, from $12.9 million, or 38 cents, in the 1999 period. Revenue rose to $104.8 million from $62.6 million.

For all 1999, the company reported net income of $75.2 million, or $2.21 a share, down from $83.7 million, or $2.46 a share, in 1998. Revenue rose to $440.9 million from $243.7.

SIH said it has applied for the Nevada gaming license it needs to complete its purchase of the Desert Inn from Starwood Hotels & Resorts and expects the transaction to be completed in the second half of 2000.

SII, the investment company that wants to take SIH private, is one-third owned by South African billionaire and resort developer Sol Kerzner through a trust called World Leisure Group Ltd.

Caledonia, an investment company listed on the London Stock Exchange, and Kersaf, a South African conglomerate affiliated with Kerzner, own the remaining stake in SII.

SIH operates nine hotels and three casinos, including the Atlantis on Paradise Island in the Bahamas, the Resorts hotel-casino in Atlantic City, the Mohegan Sun in Connecticut and luxury resorts on Mauritius and Comoros in the Indian Ocean.

SII's bid to take SIH private prompted Standard & Poor's to place the casino operator's debt ratings -- currently just below investment grade -- on Credit Watch with negative implications. S&P will study whether the privatization could impact SIH's ability to meet debt payments.

Analysts said SIH is likely to finance the stock repurchases with bank debt. Because both the Atlantis and Desert Inn have been recently renovated, SIH isn't likely to have major capital expenditures over the next few years, the analysts said.