Gold Reef Resorts is to merge with Tsogo Sun to create a hotels and gaming company worth $2.7 billion (R22 billion).
Brewer SABMiller, which holds a 49 per cent stake in Tsogo Sun, will hold a 39.7 per cent stake in the new company. Tsogo Sun owns 24.9 per cent of Gold Reef.
The resulting company will be the 36th largest on the Johannesburg Stock Exchange, and will benefit from improving economic conditions and increasing consumer spending in South Africa, as well as better access to capital, the companies said.
The combined business will also now be one of the worldÔÇÖs larger gaming and leisure groups, with 14 casinos in South Africa and 90 hotels across Africa and the Middle East.
Gold Reef and Tsogo Sun said the enlarged business would be better positioned for organic growth, as well as acquisitions.
Gold ReefÔÇÖs shareholders will now have access to Tsogo Sun's portfolio of assets for the first time.
Tsogo Sun, which also owns South AfricaÔÇÖs Southern Sun hotels group, has annual sales of $348 million (R2.6 billion) and has a market capitalisation of R17 billion.
Gold ReefÔÇÖs market capitalisation is about R5 billion.
Commenting on the merger, Gold Reef CEO Steven Joffe said: "It creates a company of significant scale and diversification across geographies and markets. As a larger and stronger company, we will be well positioned to pursue attractive growth opportunities in new markets.ÔÇØ
The South African gaming industry has struggled recently due to the financial crisis. As incomes have fallen, people have spent less timeÔÇöand moneyÔÇöin casinos.
SABMiller is widely expected to sell its stake in the new company in the near future, in order to focus on its core beverage operations.
However, for the time being the deal will enable it to distribute its beer brands throughout Gold ReefÔÇÖs casinos and hotels, which include Montecasino in Johannesburg and the SeychellesÔÇÖ Paradise Sun.
The brewer has been performing strongly despite the tough economic conditions, with overall lager volumes down just one per cent in the first half of its 2010 fiscal year. The companyÔÇÖs presence in emerging markets has helped it weather the financial crisis.
Commenting on the deal, Graham Mackay, CEO of SABMiller said: "In 2002, we facilitated a landmark Black Economic Empowerment transaction by transferring our existing gaming and hotel assets into Tsogo Sun. 
ÔÇ£We have been very satisfied with the development of our partnership with Tsogo Investments since then, and we are very pleased today to see it enter a new phase with this value accretive transaction, which has our full support."
