July 12 (Bloomberg) -- The Don Group Ltd. 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 80 percent, the biggest leap since August 2001, to 18 cents by the close in Johannesburg, increasing the company’s market value to 53 million rand. More than 1.6 million shares changed hands, more than 40 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.
To contact the reporter on this story: Stephen Gunnion in Johannesburg at firstname.lastname@example.org
To contact the editor responsible for this story: Gavin Serkin at email@example.com