Magister Investments, the Mauritius-based firm that offered to underwrite sugar producer Tongaat Hulett’s proposed R4bn rights issue, is to appeal against a decision by regulators to revoke a waiver exempting it from making an offer for all of the group’s shares.
Tongaat said in a statement that it, however, had decided not to join the appeal against the takeover regulation panel’s ruling, which follows an investigation that concluded that parties seen as related to Magister dealt in Tongaat shares during a prohibited period.
Tongaat said on Friday it would respect any outcome and remained committed to recapitalisation.
Earlier in June the takeover regulation panel revoked a previous waiver given to Magister, whose offer to underwrite as much as R2bn of the rights issue could see its shareholding jump above 50%, a threshold that would obligate it to make an offer for the rest of the shares.
The proposed rights issue is controversial as it is structured in a way that could see Mauritius-based Magister, run by Hamish Rudland — whose brother Simon Rudland operates Zimbabwe-based Gold Leaf Tobacco — take a majority stake at a discount.
Magister has said it wants Tongaat to remain listed and does not want full control.
Questions have been raised about shares bought by Betelgeux Investments, a company linked to Ebrahim Adamjee, who is a partner of Simon Rudland. Investigator Zano Nduli had set out to determine whether Adamjee and his family, who acquired 5% of Tongaaat’s shares during a restricted period via Betelgeux, are related parties with Magister.
The parties have provided scant details in response to requested information, according to Nduli, whose 37-page probe outlines a web of intertwined business connections that point to the share purchases being made in concert by Magister and the Adamjees to sway a vote by shareholders to seek the takeover waiver.
After complaints by Tongaat staff about their purported independence from Magister, Adamjee and Betelgeux later withdrew their proxies in the vote and did not participate in the meeting to grant the waiver.
The takeover regulation panel subsequently nullified the waiver resolution and withdrew its previous exemption ruling because of third-party share acquisitions. It remains unclear when Magister’s appeal will be heard. The rights offer is on hold pending the outcome.
Magister’s offer is conditional on a raft of conditions being met by the end of June, including that a waiver be in place, while Tongaat has come under even more financial pressure in 2022, including being affected by April’s flooding in KwaZulu-Natal.
The group, valued at R374m, is battling under the weight of a R6.8bn SA debt pile and is looking to tap shareholders for as much as R5bn to keep its sugar businesses intact.
At the end of May, the company said lenders had made a seasonal overdraft facility available “earlier than previously anticipated” and granted an extension on meeting all key debt reduction milestones to June 30. They include the date to implement the proposed rights offer and the step-up in the applicable interest rates on loans extended.
Other debt-relief options available to Tongaat include selling assets, or asking the banks to convert the debt to equity. Some minority shareholders have also called for the group to pursue claims with auditor Deloitte over the accounting scandal that contributed to a 97% share price decline over the past five years.
Former Tongaat executives, including former CEO Peter Straude and former Deloitte auditor Gavin Kruger, who are implicated in the scandal are expected to appear in the Durban Specialised Commercial Crimes Court on July 25. They face charges of fraud amounting to about R3.5bn and contravening the Financial Markets Act, the Companies Act and the Prevention of Organised Crime Act.
Tongaat is scheduled to publish it financial statements for the year ended March 31 on June 30. Its shares closed 5.7% lower at R2.674 on Friday, and are down more than 50% this year.
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