Following the announcement to exit their investment in the Federal Palace Hotel Lagos and thus, the Nigerian market in 2016, Sun International has provided an update on their position.
The Federal Palace Hotel, which is owned by Tourist Company of Nigeria (TCN) has been embroiled in a shareholder dispute since 2016. According to TCN’s 2017 Annual Report, Sun International acquired a substantial ownership stake in the company, in 2009 and 2010, and became equal shareholders with the Ikeja Hotel Group of shareholders. However, a petition made over Sun International’s investment in TCN led to an investigation by Nigeria’s Economic and Financial Crimes Commission (EFCC). Four senior management staff – three South Africans and one Nigerian – were detained and had their passports confiscated. Eventually, Akintola Williams Deloitte was contracted by Nigeria’s Securities and Exchange Commission (SEC) to perform a forensic audit on Sun International’s acquisition of TCN shares as well as Ikeja Hotel Group’s investment in TCN. This audit commenced at the beginning of 2018.
In a statement given on Monday, September 3rd, 2018, Sun International said it expected Deloitte’s investigation to be concluded shortly, after which it will make its exit from its maiden Nigerian investment. An investment that has longed been troubled by shareholder disputes, the poor performance of the Federal Palace Hotel and worsened by the downturn in Nigeria’s economy and terrorist activities.
TCN, in its 2017 Annual Report, posted increased revenues of 69.7% in the 18-month period from June 30th, 2016. The company still saw an increased operating loss, owing to the country’s recession, increased spend on additional regulatory compliance, and the impact of higher costs caused by the weakened Naira. The company’s casino operations continue to remain under pressure, while its hospitality business (Federal Palace Hotel) saw increased revenues due to higher room occupancy, improved room rates, and significant improvement in its food and beverage operations. The company’s board of directors has also since been reconstituted, with the SEC appointing two new directors.