A consortium of Tongaat Hulett shareholders is trying to block the proposed controversial rights offer that could cause the Rudland family-owned Magister take over the sugar producer.
Southern Africa’s largest sugar producer proposed a rights issue of up to R4bn, which Magister Investments offered to underwrite by as much as R2bn, in a deal that could see it end up owning 35%-60% of the company.
The backing of the little-known Mauritian-based company generated controversy as Magister is run by Hamish Rudland, brother of Simon Rudland, who co-owns Gold Leaf Tobacco, a company accused of pumping illicit cigarettes into the SA market.
The Rudlands are reported to be close allies of members of Zanu-PF, Zimbabwe’s ruling party.
The sugar giant valued at R608m on the JSE is pursuing the rights issue to help deal with a R6bn debt pile. It has been struggling to generate enough cash and sell off sufficient assets to meet lenders’ demands. But minority shareholders have accused Magister of staging a takeover disguised as a capital raise.
Hotly contested
In a hotly contested extraordinary meeting held earlier this month, about 79% of shareholders voted in favour of the capital raise and approved the waiver of a mandatory offer.
Legislation requires that if a company’s shareholder in a business is over a 35% threshold, a mandatory buyout offer must follow.
The waiver, approved by the department of trade, industry & competition’s takeover regulation panel, means Magister will not need to make shareholders a mandatory offer.
Just more than 20% of shareholders voted against the exemption and now a small group have launched a notice to appeal the exemption with the takeover special committee, which adjudicates the takeover regulation panel's decisions.
In a Sens statement late on Friday, a splinter group of shareholders including Artemis Investments, which has an 8.3% shareholding, has requested a hearing before the takeover special committee with the intention to seek a review of the panel waiver ruling — a move that could blow the deal out of the water.
Artemis was not available for comment at the time of publication.
Under threat
If the consortium’s appeal against the waiver succeeds, it puts the rights offer under threat as the set of proposals are conditional on Magister getting a waiver to make the mandatory offer.
Any decision made by the special committee can be reviewed by a high court.
Tongaat told Business Day that it cannot comment on the process about the review of the mandatory offer waiver.
“Tongaat Hulett and its legal counsel can only make a considered assessment once the consortium provides full details on the grounds for the review,” the company said.
The takeover special committee now has to establish a timeline of proceedings and determine when the hearing will be held.
Tongaat has previously bemoaned the time pressure it is under to meet obligations to lenders, and the appeal could delay the capital raise schedule.
The terms of the refinanced facilities are that the equity capital raise, which is five times its market value, be fully implemented by end-March and that proceeds of at least R2bn be paid to the SA lenders by April 14.
In an attempt to claw back R450m, the company has launched legal and civil claims against former directors implicated in the group’s accounting scandal in which Tongaat lost more than 90% of its market value after its disclosures in 2019.
The largest private-sector employer in Mozambique and Zimbabwe is also finalising claims against its former auditor Deloitte.
Tongaat’s share price fell the most in more than a week on Friday, down 3.64% to R4.50, having dropped 20% in the past month.
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