Something brewing?

As previously mentioned on this blog Gold Reef Resorts (GDF) is a share to watch closely.

Hosken Consolidated Investments (HCI) has spent around R942 million in buying 42 million shares from various empowerment shareholders of GDF. This has been done through Tsogo Sun Holdings which is not only a competitor of GDF but also part of the failed buyout of GDF involving Ethos in a massive private equity deal. Remember, Ethos put in a bid which failed and then Tsogo put in a bid which failed.

The mechanics are simple. HCI owns 38% of Tsogo. Tsogo now owns 20% of GDF (it owned 5% before the transaction). This gives HCI an effective 7.5% interest in GDF.

Tsogo, HCI paid R22,50 per share which is a substantial premium to the current R16,50 price but this is totally understandable because Tsogo is a competitor of GDF.  Interestingly, Tsogo objected to the Ethos deal which was pitched at R34 per share. Did they perhaps know something?

HCI and Tsogo might very well push for more deals with existing shareholders to bulk up its holding in GDF. HCI might then push for a merger between the two, unlocking huge value. This is all very plausible.

Interesting…