Group of cane growers mulls bid for Tongaat assets

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  • A consortium of cane growers that supplies Tongaat Hulett has expressed interest in acquiring the assets of the embattled sugar producer. 
  • No financial terms have been disclosed.
  • Tongaat entered business rescue in late October.
  • For more financial stories, go to the News24 Business front page.

A consortium of cane growers that supplies Tongaat Hulett has expressed interest in acquiring the assets of the embattled sugar producer. They believe their offer is one of the few viable options to save 11 000 small-scale growers and 20 000 cane grower jobs.

The expression of interest is being made to Tongaat's business rescue practitioners on behalf of growers delivering more than 5 million tonnes of sugar to Tongaat. The proposal for the acquisition of assets includes the operating mills at Maidstone, Amatikulu and Felixton, the mothballed factory at Darnall, the Hulett's Refinery, Voermal animal feeds and all associated brands and trademarks.

Tongaat Hulett entered business rescue in late October after lenders opted not to approve the sugar producer's restructuring plan, which was aimed at solving an excess debt pile in SA of more than R6 billion. As it looked to complete its milling and crushing season, the excess debt was causing a cash crunch at the firm and left hundreds of growers unpaid. The firm's business rescue practitioners and cane growers have recently agreed on terms for payments coming to cane growers at the end of November.

The business rescue practioners - Metis Strategic Advisors - said on Wednesday the business rescue plan will be presented at the end of January, when the market will be updated in detail on the business rescue process.

The consortium, provisionally named NewCo, said on Wednesday agreements would need to be "signed expeditiously" to enable maintenance to be completed in time for the 2023/24 season.

It added that funding arrangements would be concluded after binding letters of intent to finance NewCo were signed, and the financial model fully investigated and approved. In response to questions from News24, the consortium said it couldn't give a figure on the value of the deal. 

"This will in large part be determined by negotiations with the business rescue practitioners at Tongaat Hulett which have yet to begin," said spokesperson Simon Cleasby.

The offer to join the consortium will be extended to the more than 11 000 small-scale growers and 400 commercial and land reform growers that supply the Tongaat Hulett mills, as well as a number of strategic partners, it said.

"How many of these parties choose to participate in the consortium will depend in part on the deal reached with the business rescue practitioners at Tongaat Hulett. This is why we would like to see negotiations get under way as soon as possible, so that these critical details can finalised timeously," Cleasby said.

"The potential inclusion of strategic partners in NewCo who have access to finance and appropriate technical skills will also then be actively considered. Discussions are under way to secure 2023/24 working capital requirements through trade finance arrangements," its statement read.

The consortium added that the with full support of the grower community, it was optimistic the state, banks and others would work with them to ensure the best possible outcome for the industry.

"The proposal 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."

Tongaat has said it contributes R11 billion to SA's GDP, while about 500 000 livelihoods are dependent on the sugar producer across southern Africa.

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