Tsogo Sun to challenge S.African watchdog's decision to block acquisition - CNBC Africa

Tsogo Sun to challenge S.African watchdog's decision to block acquisition

Southern Africa

by Reuters 0

Tsogo Sun to challenge a decision made by the Competition Commission. PHOTO: south-african-hotels

The competition watchdog wants to block the company’s acquisition of stakes in units owned by the [DATA SUI:Sun International] hotel group.

The Competition Commission said on Thursday it had ruled against the transaction on the grounds that it could prevent or lessen competition in the gaming and hotel market due to the likelihood of coordination between the merging parties.

(READ MORE: Tsogo Sun ups stake in Cullinan Hotel)

The final decision rests with the Competition Tribunal, which takes recommendations from the commission but has in the past overturned decisions by its sister watchdog body.

[DATA TSH:Tsogo Sun] said in May last year it would acquire Sun International's stakes in SunWest International and Worcester Casino for 2.1 billion rand (181.8 million dollars), subject to a green light from the Tribunal.

Shares in Tsogo Sun and its smaller rival Sun International fell 4.58 per cent and 0.6 per cent respectively on the news, while the broad All-share index edged 0.31 per cent lower.

(WATCH VIDEO: Tsogo awards 5 directors R200mn interest-free loan to buy shares)

Both hotel groups are struggling to fill up rooms as the government and companies spend guardedly due to weak economic growth prospects while high household debt levels have made consumers wary of gambling and leisure travel.

Tsogo Sun has attempted to offset this decline through acquisitions and expansions on its hotels.