Consortium of cane growers wants to buy a chunk of Tongaat’s assets

A consortium of sugarcane growers who currently supply Tongaat Hulett, have submitted a proposal to the sugar producer’s business rescue practitioners, expressing interest to acquire Tongaat’s South African mills, refinery, animal feeds and brands.

In a statement released on Tuesday, the consortium – which will form under limited liability company NewCo if the deal is approved – says it is stepping forward to ensure the survival of farming operations linked to Tongaat’s operations in the North Coast of KwaZulu-Natal.

“The proposal is for the acquisition of assets including the operating mills at Maidstone, Amatikulu and Felixton, the mothballed factory at Darnall, the Huletts Refinery, Voermol animal feeds (sic), and all associated brands and trademarks,” NewCo spokesperson Simon Cleasby said.

Should the deal be a success, the consortium says it could protect the livelihoods of about 11 000 small-scale growers, as well as 20 000 jobs in the cane-growing industry.

“It is also an opportunity for commercial growers and small-scale growers to align and optimise synergies for mutual viability and sustainability over the longer-term.”

Read:
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Tongaat woes

The financially distressed – and JSE-suspended – agri-processing and property company has in the past few years fallen on hard times, with its main challenges relating to allegations of mismanagement and overwhelming debt.

In late October, the KwaZulu-Natal-based company announced that it would be submitting its South African operations to a voluntary business rescue process, in an attempt to sort out its affairs.

At the time of entering the rescue process, Tongaat was battling around R5 billion worth of debt, with reportedly few to no lenders willing to give it the lifeline it needed.

Read:
Tongaat Hulett forced into business rescue
Tongaat Hulett makes progress with its debt restructuring

Raising capital

In the statement announcing its plans, the consortium did not outline concrete plans to fund its ambitions. The group simply noted that it is in talks to secure the funds.

“Funding arrangements will be concluded after binding letters of intent to finance the acquisition of NewCo have been signed, with the financial model having been fully investigated and approved,” 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 underway to secure 2023/24 working capital requirements through trade finance arrangements,” Cleasby added.

The group added that to enable the timely completion of off-crop maintenance and ensure the mills are ready for the 2023/2024 season, the agreements would need to be signed very soon.

Listen: Dr Thomas Funke of  SA Canegrowers Association says over 14 000 jobs are at risk as Tongaat Hulett misses payment deadline (read the transcript)