SOUTH African investment consortium, Vision Group, is expected to rebrand agriculture and agri-processing firm, Tongaat Hulett Limited, as it prepares to assume all its assets with a book value of ZAR5,9 billion (US$330,05 million).
This follows a rejection by Tongaat’s shareholders of a debt-to-equity deal with Vision on August 8, which would have given the latter a 97,3% stake in the company. Tongaat has operations across the region including Zimbabwe. Locally, Tongaat operates through its wholly-owned Triangle Sugar operation and a 50,3% shareholding in the agriculture and agro-processing firm, Hippo Valley Estates Limited.
The debt-to-equity deal was one of two options under a business rescue plan adopted in January to save Tongaat after the firm’s reached ZAR13 billion (US$726,75 million) in total claims, made against it as of October 2023.
The second option, now adopted, was the sale by Tongaat of all its assets including its businesses as ‘going concerns’ to Vision by way of a debt to asset swap against the claims.
“While we had hoped that the current shareholders would vote in favour of the debt to equity swap so that THL [Tongaat] can remain listed on the JSE [Johannesburg Stock Exchange] and be taken off the business rescue in September 2024 and back to business as usual, thereby creating value for all shareholders in the JSE-listed THL and saving jobs in all jurisdictions it operates, today offers us an opportunity to move forward with the alternative plan,” Vision said in a statement.
“VI [Vision] shall proceed to access its right to conduct a debt to asset swap of all THL assets that are included in the lender group debt package, which include all the assets in the operating businesses in South Africa as well as all shares in the operating businesses across other jurisdictions.”
The proposed 97,3% stake would have involved an exchange of ZAR5 billion (US$279,67 million) of the Tongaat claims, by Vision, for the former’s equity.
Thereafter, there would have been a materially reduced remaining claim of ZAR3,6 billion (US$201,36 million) owed by Tongaat to its creditors.
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Vision said the second option allowed the firm to move forward with a new unlisted entity, giving it a fresh start without any legacy obligations.
“We will take over staff, assets including the THL brands into a new company owned 100% by VI. It is unfortunate that the decision today by the current shareholders means they shall receive zero value for their shares and THL will be wound down/liquidated through the business rescue process,” Vision said.
“The creditors approved alternative business rescue plan debt for assets process does not require shareholder approvals instead we as lenders are going to exercise our rights. It will be plain sailing for VI who will own 100% of THL and operate it as a non JSE-listed company until we decide to list on the JSE or /and London Stock Exchange.”
As the book value of all assets of Tongaat was ZAR5,9 billion, after the realisation of assets there will be debt remaining of about ZAR7 billion (US$391,32 million).
“It remains our view that the company stands a reasonable prospect of being rescued successfully, as contemplated in section 128(1)(h) of the Companies Act, in a manner that will balance the rights and interests of all affected persons,” Tongaat said.
“The fact that the equity transaction will not be pursued does not signal the end of the road for THL, but marks the beginning of the road for the asset transaction. The asset transaction may merely extend the timetable for the implementation of the THL business rescue proceedings, but with the continued support of all employees, suppliers, creditors and stakeholders the rescue remains implementable.”
