Don Gains Most in 11 Years on Hotel Sales: Johannesburg Mover

The Don Group Ltd. (DON) catapulted the most in almost 11 years after saying it sold three of its nine hotels for 77.5 million rand ($9.3 million) as it exits the travel and leisure industry.

The stock surged as much as 70 percent, the biggest leap since August 2001, to 17 cents and traded at 15 cents by 12:25 p.m. Johannesburg, increasing the company’s market value to 44.2 million rand. More than 1.4 million shares changed hands, almost 35 times the three-month daily average.

Overcapacity in the market after more hotels were built ahead of the 2010 Soccer World Cup in South Africa made it difficult for smaller groups to make a profit, Anthony Clark, an analyst at Vunani Securities, said by phone from Cape Town.

“The hotel market has changed,” Clark said. “The only way to make money as a shareholder is to force Don to break up, which is exactly what it is doing.”

Proceeds from the sales will be used to reduce interest- bearing long-term debt, the group said in a statement late yesterday. Its remaining six hotels will also be sold as it moves away from owning and operating hotels.

“The company is a liquidation plan on the asset value,” Clark said.

To contact the reporter on this story: Stephen Gunnion in Johannesburg at sgunnion@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net