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Tongaat rights offer approval shifts the spotlight to Rudland

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AFTER regional sugar giant Tongaat Hulett Ltd secured approval for a R4 billion rand (US$267 million) rights issue to help keep the South African company afloat amid resistance from small investors, the spotlight is now on Zimbabwean transport and tobacco tycoon Hamish Rudland.

JONATHAN MBIRIYAMVEKA

Rudland controls little-known Mauritian-reg[1]istered entity Magister Investments Ltd under[1]writing half the deal — R2 billion (US$133 million) — in the midst of controversy over the transaction whose ramifications reverberate across the region.

Tongaat, a leading agribusiness in sugar, eth[1]anol, animal feeds and cattle, has a significant asset base and footprint in southern Africa, including operations in South Africa, Mozam[1]bique, Botswana and Zimbabwe.

Following a heated extraordinary general meeting on Tuesday to vote on the deal, Tongaat announced the proposed massive recapitalisation plan through a rights offer backed by major shareholders at a special general meeting.

 Tongaat chief executive Gavin Hudson said: “We are very happy with today’s outcome and appreciate the robust shareholder engagement process and their firm support.

 This is a key step in securing the future of Tongaat and provides us with the mandate to further engage with shareholders to raise fresh capital to reduce our unsustainable debt levels.

 We look forward to this contributing to a market capitalisation consistent with the company’s value as a leading regional agriculture business, helping to protect the jobs of our 29 000 employees across Sadc, and ensuring that Tongaat can continue to be a major socio-economic contributor to the region.”

 The deal was characterised by controversy and uncertainty. It caused anxiety among shareholders and workers across the region, including in Zimbabwe, where Tongaat has interests in Zimbabwe Sugar Sales (Pvt) Ltd, Hippo Valley Estates Limited and Triangle Sugar Corporation Ltd.

Magister, which recently engineered the consolidation of Zimplow and Unifreight subsidiaries in Zimbabwe, is likely to emerge from the deal with up to 60% of Tongaat, which will be a major corporate boardroom coup in the region.

 Despite its financial problems, Tongaat is huge: it produces 43% of South Africa’s sugar requirements and accounts for over half of Zimbabwe’s sugar sales.

If minorities follow up their rights, Magister could secure around 50% of the company.

“We have agreed that they (Magister) get a board seat for every 20% of shares that they own, with a maximum cap of 60%,” Hudson said.

“We assume that they would be a large shareholder by the end of the rights offer. But that will be determined in January or February next year. Magister has vast experience in sectors which complement THL’s strategic focus areas. Magister is expected to add value (to Tongaat) through its logistics, agricultural management and commercial experience.”

It added: “The introduction of Magister is expected to add impetus to THL’s turnaround strategy and provide the management team with the financial and operational flexibility to redirect its focus towards growth initiatives.

“We have agreed that they (Magister) get a board seat for every 20% of shares that they own, with a maximum cap of 60%,” Hudson said.

“ We assume that they would be a large shareholder by the end of the rights offer. But that will be determined in January or February next year. Magister has vast experience in sectors which complement THL’s strategic focus areas. Magister is expected to add value (to Tongaat) through its logistics, agricultural management and commercial experience.”

It added: “The introduction of Magister is expected to add impetus to THL’s turnaround strategy and provide the management team with the financial and operational flexibility to redirect its focus towards growth initiatives.

The company was saved from the brink of collapse last year after a fraudulent accounting scandal involving R12 billion (US$800 million).

The Rudlands — Hamish and his brother Simon — already run Unifreight Africa Limited, a transport and logistics company listed on the Zimbabwe Stock Exchange, offering courier services and abnormal loads.

Following the acquisition of Unifreight’s businesses by Pioneer Corporation Africa, initially Pioneer Transport, Unifreight Africa Limited emerged, with Swift transport — including its entities Bulwark and Clan — as the mainstay.

The Rudlands also have significant interests in Zimre Holdings, a group of companies in gener[1]al insurance, life and pensions, and agro-industries, and CFI, a leading agro-based industrial holding company.

They also have an interest in multinational Gold Leaf Tobacco Corporation which deals in tobacco processing, cigarette manufacturing and marketing and distribution.

This week’s rights offer deal only proceeded after all lender and regulatory approvals were obtained and other conditions precedent were fulfilled, although it is still work in progress.

The 132-year-old company secured the required support for the discounted fundraising after a stormy two-hour meeting on Tuesday as minority shareholders representing 20% of the equity stake resisted and voted against the deal.

Outspoken investor David Woollam demanded Tongaat’s board and management produce more information on Magister and its investments that justify it being brought in as a strategic shareholder.

“I find it extraordinary that a company which is about to take control of Tongaat, we know nothing about, or no one is prepared to talk about,” Woollam said.

The Rudlands say Magister is an investment company that has interests in both publicly listed and private companies, although it is not part of his family corporate dynasty, and has no interests in controversial gold and tobacco deals as widely feared in some circles that allege illicit proceeds from there could be part of the transaction.

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