By Alistair Anderson

Queensgate Hotels and Leisure, which was voluntarily suspended from trading on SA’s AltX, on Monday announced that Realcor would inject R1.2bn worth of assets into it.

The deal may ease pressure on investors who put money into debentures to provide funding for the Blaauwberg hotel, a main project of cash-strapped Realcor, which has struggled to finance the building of the hotel and been unable to service interest expenses on the debentures.

The asset injection would lead to a change of control and a reconstitution of the board, in a reverse takeover of Queensgate.

Queensgate’s board said in a statement yesterday that the deal was in the interests of its shareholders, who would "see 75% of the R1.2bn injected in hard assets and the remaining 25% in income- producing businesses partly supported by profit warranties".

The transaction would lead to an expansion of the prior Queensgate business focus, from a narrower focus on hotel management and development to one that includes physical ownership of the property assets and construction, the statement said.

The deal would be subject to Realcor and Queensgate performing due diligence checks on one another. Shareholders from both companies are also be required to approve the deal.

Queensgate said the deal would result in a dilution of 92% of its equity.

Of that figure, 2% referred to the settlement of adviser fees for existing shareholders. DC Liquid Capital is assisting in managing the deal.

If the acquisition went ahead, Realcor’s shareholders would hold at least 90% of the joined enterprise, Queensgate shareholders would own at least 8% and DC Liquid Capital would own at least 1%.

The proposed acquisition was in line with Queensgate’s recapitalisation strategy.

Queensgate, which listed on the AltX stock exchange for small and medium capitalisation companies in September 2008, voluntarily suspended trading on the exchange earlier this year.

In February, two directors at Queensgate sold 94.8-million shares, or 5% of the issued stock, to cover some of its debt.

Andrew Hubbard, CEO at the time, and strategic officer Holger Friedrichsen had pledged the stock to the Hospitality Property Fund and Exhibition Building Investments as surety.

They resigned from their positions in March but rejoined the board a few weeks later.

Source: Business Day