SABMiller sells $1bn stake in Tsogo Sun

(Reuters) – Global brewer SABMiller Plc sold its $1 billion stake in South Africa's top gaming and hotel group Tsogo Sun on Friday, disposing of a non-core business and giving it some cash to beef up its beer business in fast-growing Africa.

SABMiller, which is also listed in Johannesburg, said it sold 294 million Tsogo Sun shares to institutional investors at 25.75 rand each, raising 7.6 billion rand ($711.98 million).

Following the finalisation of the sale, Tsogo Sun will buy back from SABMiller an additional 133 million shares at 20.96 rand each, or 2.8 billion rand.

"We will seek to reinvest the net proceeds of this disposal in our core growth beverage businesses, including our African operations," Alan Clark, Chief Executive of SABMiller, said in statement.

Shares of Tsogo Sun, the other 41 percent of which are owned by investment company HCI Ltd, surged 5.8 percent to 27.30 rand by 1158 GMT.

For Tsogo Sun, which owns Johannesburg's Montecasino gaming complex and premier hotel brand Southern Sun among other assets, the deal would help boost earnings, improve liquidity in its shares and possibly spark a valuation re-rating.

Tsogo Sun shares should be trading at about 40 rand based on its most likely earnings trajectory over the next five years, according to Thomson Reuters StarMine.

StarMine's valuation model, which uses a blend of analysts' forecasts and its own tools, estimates Tsogo Sun's compound growth rate at 9 percent a year over the next five years – three times what the market expects.

Tsogo Sun merged with casino and theme park operator Gold Reef in 2011, a deal that saw SABMiller's stake shrink from 49 percent.

($1 = 10.6745 South African Rand)