Tongaat Hulett might have a new buyer after consortium NewCo announced on Wednesday that it had submitted an expression of interest in acquiring the company’s South African mills, refinery, animal feeds subsidiary and other brands and trademarks.
An expression of interest is one of the initial transaction documents shared by a buyer with a seller to indicate a serious interest in a potential takeover.
Tongaat Hullet entered into business rescue in October after it could not pay back its lenders.
The sugar and property company has been marred by high debt levels, alleged financial misstatements and historic mismanagement under previous leadership and needs R1.5-billion to service its debt.
NewCo is a grower-led consortium made up of growers that supply Tongaat Hulett.
“The offer is made on behalf of growers delivering more than five million tons of sugarcane to the Tongaat Hulett mills in the North Coast of KwaZulu-Natal in order to ensure the survival of these farming operations, the thousands of livelihoods they support, and socio-economic stability for the greater region,” Newco spokesperson Simon Cleasby said in a statement.
Cleasby said the proposal was for the acquisition of assets including the operating mills at Maidstone, Amatikulu and Felixton, the mothballed factory at Darnall, the Huletts refinery, the Voermol Feeds subsidiary and all associated brands and trademarks.
It is underpinned by a vision of an inclusive, collective investment in the assets of NewCo, which will be held by all Tongaat Hulett-supplying growers in a single investment vehicle with a majority shareholding for supplying black growers.
“This will ensure that NewCo meets the industry’s transformation objectives in the long term. As small-scale growers are generally unable to securitise land, alternate funding methods will need to be explored in order to achieve this vision,” Cleasby said.
If the acquisition is approved, the assets will be held by NewCo, an unlisted limited liability company.
Funding arrangements will be concluded after binding letters of intent to finance the acquisition have been signed, with the financial model having been fully investigated and approved, the consortium said. A letter of intent is a document declaring the preliminary commitment of one party to do business with another.
“Discussions are under way to secure 2023/24 working capital requirements through trade finance arrangements,” NewCo said, without disclosing how much it wanted to purchase Tongaat for.
“NewCo represents one of the few viable opportunities to save more than 11 000 small-scale growers, more than 20 000 jobs in the cane growing sector alone, and a significantly greater number of indirect job losses in the region,” Cleasby said.
“The consortium is committed to exploring every possible avenue to save the operations of Tongaat Hulett, protecting thousands of desperately needed livelihoods on the North Coast of KwaZulu-Natal. This will ensure the Tongaat Hulett mills continue to operate and process sugar supplied by growers in the surrounding areas.”
He added that agreements would need to be signed expeditiously to enable off-crop maintenance to be completed in time to ensure that the mills are operational for the 2023/2024 season.
The Mail & Guardian contacted Tongaat’s business rescue practitioners, but they signalled they were not in a position to comment at this stage on whether they had been approached by NewCo.
The business rescue plan will be communicated by the end of January. The business rescue practitioners asked for an extension of the date for the publication of the plan from 1 December 2022 to 31 January 2023.
