4 December 2023
By: Lloyd Phillips
It has been over a year since agri-processing giant Tongaat Hulett went into voluntary business rescue, and one of the two recent and reportedly promising proposals may save it from liquidation.
Tongaat Hulett’s creditors and business rescue practitioners have reportedly rejected a previously promising proposal by Kagera Sugar of Tanzania to acquire the company’s sugar assets in South Africa, Zimbabwe, Botswana and Mozambique. Tongaat and its subsidiaries went into voluntary business rescue on 27 October 2022.
Tongaat’s creditors and business rescue practitioners have now pushed two other proposals to the top of the preferred bidders list. These are by the RGS Group, a Mozambique conglomerate, and The Vision Parties, a multinational consortium. Vision comprises Terris Sugar, the Guma Africa Group, Remoggo and Almoiz Industries.
In an update on Thursday 30 November, Tongaat’s business rescue practitioners said: “Kagera’s proposal cannot be considered at this time for various reasons, including a requirement in their proposal for exclusivity. Their proposal has, therefore, not been included in an additional amended business rescue plan.” No other information was provided.
The business rescue practitioners, Trevor Murgatroyd, Petrus van den Steen and Gerhard Albertyn, published comprehensive business rescue plans for the RGS and Vision, saying they potentially provide Tongaat’s creditors with “the best possible outcome”.
“We have consistently stated that business rescue is a creditor-driven process and that we are there to develop, facilitate and implement a plan that balances the interests of all stakeholders,” they said.
“We are confident that we are presenting fair and balanced business rescue plans under challenging circumstances. Importantly, we want to highlight that these amended business rescue plans are substantially improved from those put forward by the bidders during the [initial] strategic equity partner [selection] process.”
The business rescue practitioners said the RGS and Vision proposals share similarities, including:
- The purchase of secured claims and security entitlements valued at approximately R7,7 billion.
- The future conversion of these secured claims into equity, thereby substantially improving Tongaat’s solvency.
- An enhanced unsecured creditor distribution compared to the zero cents in the rand expected liquidation outcome.
- The continued listing of Tongaat on the Johannesburg Stock Exchange with existing shareholders remaining invested in the company, although with their holdings expected to be diluted. This contrasts with a nil entitlement in a liquidation, sale of assets or business transaction.
A formal meeting of Tongaat creditors has been scheduled for 8 December, when a vote will decide which bid will be approved.
“Should the business rescue plan not be adopted, we are of the view that the [current] business rescue [of Tongaat] will probably be terminated and converted to liquidation proceedings,” said the practitioners.
This would be socioeconomically devastating across Southern Africa’s primary sugar cane value chain. Tongaat’s production facilities can crush 12,7 million tons of sugar cane annually, of which 5,8 million tons is provided by thousands of third-party growers across all production scales; and produce 1,5 million tons of raw sugar, 750 000 tons of refined sugar, 400 000 tons of animal feed and 40 million litres of ethanol.
“At the peak of the annual sugar season, Tongaat’s operations employ more than 23 000 people, support more than 185 000 employment opportunities and provide a livelihood to more than 21 000 farmers, many of whom are small-scale growers,” the business rescue practitioners said.
