Grower-led group bid for Tongaat Hulett

NEWCO, a grower-led consortium of Tongaat Hulett suppliers and growers, has 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.

NewCo is a grower-led consortium made up of growers who supply Tongaat Hulett.

Simon Cleasby, NewCo’s spokesperson, said: “The offer is made on behalf of growers delivering more than 5 million tons of sugar cane 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.”

The consortium said it had submitted an expression of interest to Tongaat Hulett’s business rescue practitioners to buy its South African assets.

These include the operating mills at Maidstone, Amatikulu and Felixton, the mothballed factory at Darnall, the Huletts refinery, Voermol animal feeds, 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.

“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 Hulett 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.

“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.

“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,” Cleasby said.

If the acquisition is approved, the assets will be held by NewCo.

Tongaat Hulett declared financial distress last month and began a voluntary business rescue process, leaving thousands of cane growers unpaid.

The sugar and property company has been marred by high debt levels, alleged financial misstatements and historic mismanagement under previous leadership. It needs R1.5 billion to service its debt.

Heidi Geldenhuys, a spokesperson for the Business Rescue Practitioners, said: “The business rescue plan will be presented at the end of January 2023 when we will update the market in detail on the business rescue process.”