March 23, 2007
Source: Business Report, by Audrey D’Angelo

Cape Town - The sale of Protea Hotels to an Australian travel and lodging group for R1.48 billion will free the group's black shareholders of debt and leave them with enough cash to buy 26 percent of the local hotel group.

The black economic empowerment (BEE) consortium that bought 54 percent of Protea two years ago includes Aka Capital, led by former Eskom chairman Reuel Khoza.

In terms of the deal announced yesterday, Australian travel services and hospitality group Stella will pay R1.48 billion for the whole of Protea. Stella will then sell 26 percent of the company to the consortium, whose members include Popcru Investment Holdings and the National African Women's Alliance.

Khoza said the deal meant that the consortium members would not have to borrow money to pay for their 26 percent Protea stake.

Aka Capital chief executive Sam Nematswerani said it was a very good deal for the black investors because it unlocked millions of rands while allowing them to continue to participate in the fortunes of Protea and the Stella group.

Normally, empowerment investors had to "wait years for any worthwhile returns", he said.

Arthur Gillis, the managing director of Protea, said the hotel group's top management and all 30 000 staff members and associates would retain their jobs, and the company's five-year business plan would continue.

Protea, which has 126 hotels throughout Africa, had wanted to expand globally for some time and the buyout by the Stella group offered this opportunity, Gillis said.

It would be business as usual for Protea in Africa, but it would also become part of a rapidly growing and geographically diverse business with "excellent brands and a reputation for quality and service".

There would be benefits on both sides through an exchange of technology, and Protea could expect growth in business from Australians and New Zealanders as a result of Stella's booking service.

Allan Duke, Protea's brand manager, said: "South Africa's hosting of the 2010 Fifa World Cup was part of the thinking behind the deal, but it goes way beyond that. Stella has seen how buoyant the South African economy is, and our rate of growth over the past 10 years."

Duke said Protea would open nine new hotels this year, including three in South Africa: in Kimberley, Bloemfontein and Johannesburg.

It already had nine in Nigeria and would add three more this year.

Protea was returning to Kenya after withdrawing from that country several years ago, with a five-star African Pride hotel with 141 rooms in Nairobi's leading shopping and office complex.

The Stella group is a division of MFS, an Australian investment and funds management company, which is listed on the Australian Stock Exchange and manages $4 billion (R29 billion) worth of assets.