A supplier is asking the high court in Durban for an urgent interdict to stop Vision Consortium’s purchase of Tongaat Hulett, arguing that it cannot save the embattled producer, which could still go bust.
Powertrans Sales and Services and its owner Mohini Naidoo claim that the Tongaat purchase was conducted in such a way that it will lead to a slow but inevitable liquidation, and ultimately the SA division will collapse, leaving thousands of rural farmers without livelihoods.
Much of rural KwaZulu-Natal relies on the sugar producer, which buys from more than 20,000 farmers and employs about 2,500 people directly.
Tongaat was sold to the Vision Consortium, led by SA businessperson Robert Gumede and Zimbabwean Rute Moyo, in January after a lengthy business rescue process marred by endless legal challenges.
As Tongaat is in business rescue, a process to save it from bankruptcy, the sale was concluded by a voting process in which creditors had to approve a business rescue plan.
Vision’s plan was approved by lenders, but it was the only option on which to vote. Competing bidder RSG, a Mozambican consumer and agricultural goods group, pulled out the day before the vote.
Naidoo wants implementation of the Vision to be interdicted before it is too late, and then declared unlawful and struck down, which would have the effect of removing Vision as the owners.
Naidoo argues in court documents that the business rescue plan is unlawful, as it does not fulfil the purpose of a business rescue, which is to show how a distressed company will be saved from inevitable liquidation.
Instead, it shows that Tongaat will remain “commercially and factually insolvent”, with R2bn more debt than assets in the 2025, 2026 and 2027 financial years.
She points out that no money has been provided for working capital to run the business and no agreement was reached on repaying the Industrial Development Corporation (IDC) its R2.3bn loan that kept Tongaat running during business rescue.
She suggests that the IDC could call in its debt, which Tongaat would be unable to repay, and so it would go into liquidation.
The court documents also say no evidence was provided in the plan to show how Vision will pay R525m in mandatory sugar levies that need to be paid into a trust fund and could later be paid out to the industry.
On Monday, Vision accused RGS of being behind the court action.
Vision spokesperson Rob Bessinger said: “We are opposing this frivolous application which is an RGS 2.0. This looks like another attempt by RGS to torpedo the business rescue process for their nefarious reasons having failed to provide proof of legitimate funds to back their R8bn phantom offer.”
RGS did not respond to requests for comment.
The court document details how RGS’s R8bn bid was far superior for Tongaat’s wellbeing, for suppliers, lenders and the sugar industry, and argues it is “unconscionable” that business rescue practitioners Metis Strategic Advisors did not fight tooth and nail for it to be implemented.
Naidoo argues that the Companies Act requires that Metis should have taken into account “the balance of the rights and interests of all affected persons”. But she says this did not happen, with the debt and interests of small suppliers ignored, rendering the plan unlawful.
Suppliers, owed more than R1bn, will get only 5c in the rand for what they are owed, implying a 95% haircut.
“The applicant and thousands of unsecured creditors in the same position stand to lose hundreds of millions of rand in circumstances where the lender group will be paid billions and Vision will walk away having acquired Tongaat at a staggering discount.”
When RSG pulled out of the voting process, it said it did so because the process was rigged, and it accused the business rescue practitioners of favouring Vision as the buyer. The new court case makes the same claims.
Metis would not comment.
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