Gumede races against time to buy Tongaat

Mozambican group RGS and Vision Consortium, which includes Robert Gumede,

Businessperson Robert Gumede has until December 7 to buy the debt of Tongaat Hulett from nine banks or face off against Mozambican group RGS to see who is chosen as the owner of the sugar producer. Tongaat on Wednesday evening published two business rescue plans, each detailing a bid to acquire the company.

Businessperson Robert Gumede has until December 7 to buy the debt of Tongaat Hulett from nine banks or face off against Mozambican group RGS to see who is chosen as the owner of the sugar producer.

Tongaat on Wednesday evening published two business rescue plans, each detailing a bid to acquire the company.

The two potential new owners are RGS, a Mozambican agricultural group, and the Vision Consortium, which includes Terris Sugar and Gumede, a South African.

The creditors, who are owed billions of rand, will vote on the buyer on December 8 and choose the one that will offer the most for their debt.

The two new bids are both better than what had been offered for Tongaat in the initial selling process earlier in 2023. Gumede’s group is not the guaranteed winner of the vote, as reported by some media, since it has not completed a deal with the nine creditor banks to buy their debt and then gain the majority vote.

Gumede had hoped to buy the debt totalling R7.7bn by midNovember, but talks are still continuing.

Tanzanian business Kagera Sugar, the initial buyer earmarked by the business rescue practitioners, is no longer in consideration for a variety of reasons, including its desire for exclusivity.

RGS has offered to buy the banks’ claims of R7.7bn for R3.6bn. It is not clear what Gumede has offered the banks, but it is likely to be at a discount to the overall amount.

In both deals unsecured creditors will get a small amount for what they are owed as opposed to nil had Tongaat been liquidated in October 2022 instead of commencing business rescue proceedings.

RGS appears to have offered the highest amount to the unsecured creditors, which includes the ordinary suppliers, with an initial R75,000 for their debt and 40c for anything owed after that. RGS is owned by the powerful Mozambican Gulamo family and produces sugar in Mozambique. It also runs other businesses, including tobacco and tea firms.

Tongaat will probably remain listed on the JSE, but shareholders’ equity will be very diluted, meaning their shares will be worth significantly less.

Under Gumede’s plan, existing

shareholders will hold 2.7% of the company.

RGS plans to initially own 95% of the company and then reduce its shareholding to 51%60% within a year.

RGS has offered an initial R500m in working capital to run the business, but it is not clear what Gumede would offer.

Both bidders said they will come to an agreement with the

SA Sugar Association on the outstanding levies owed to it. Tongaat did not pay the statutory levies that all sugar millers and farmers pay from October 28 to end-March.

Metis Strategic Advisors, the business rescue practitioners, said it has tried to “develop, facilitate and implement a plan which balances the interests of all stakeholders”.

The business rescue practitioners are required by the Companies Act to look after the interests of the farmers, employees, shareholders and banks and other creditors such as suppliers.

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 bidding process.”

Tongaat was placed in voluntary business rescue in October 2022 in a bid to avoid bankruptcy after a R12bn shortfall in the accounts was uncovered in 2018.

KAGERA SUGAR, THE INITIAL BUYER EARMARKED, IS NO LONGER IN CONSIDERATION