RESTRUCTURING PLAN TIMIMG SET; REQUEST MADE TO JSE TO SUSPEND SHARE TRADING

Tongaat Hulett today informed shareholders that the company’s newly established restructuring committee will present the restructuring plan to the Tongaat board by 30 September 2022. The comprehensive restructuring plan seeks to improve liquidity levels, reduce debt to sustainable levels and provide clarity on a way forward for the company to all stakeholders.

As both the Board and the auditor need more certainty around the debt refinancing and balance sheet restructuring, Tongaat is unable to release its provisional annual financial results for the financial year ended 31 March 2022 by 30 June 2022 as required by the JSE.

A longer-term financial solution is required for Tongaat Hulett’s audited annual financial statements to be finalised, and this is largely dependent on the outcome of the restructuring plan. While every effort is being made to finalise the restructuring plan as soon as possible, it is clear that neither the Provisional 2022 Financial Statements nor the Audited 2022 Financial Statements will be finalised by 31 July 2022.

As a longer-term financial solution is required for the results to be released, Tongaat has applied to the JSE to have trading in its shares voluntarily suspended. A suspension would protect the interests of current and potential shareholders as the company engages with multiple parties on solutions to progress the restructuring.

The JSE issued a SENS earlier today confirming that it is considering the request for suspension received from the Board and stating that it will communicate its decision on the possible suspension as soon as possible.

A suspension would have no material impact on the company’s financial stability or its business operations.

To allow sufficient time and resources to complete the restructuring plan, the Company is in final negotiations with the South African lender group to replace the Company’s seasonal overdraft facility with a larger short-term ‘borrowing base’ liquidity facility.

The lender group remains supportive of Tongaat Hulett and we are currently engaging with them and other parties to provide liquidity, giving us additional time to work to progress a comprehensive restructuring solution.

The company is committed to open and transparent engagement with all its stakeholders, and to working to resolve the challenges that confront this critically important business.  

Shareholders will be updated on developments and further announcements will be made as and when appropriate.

Gavin Hudson, CEO of Tongaat Hulett said: “We have generated further momentum in the restructuring process with a clear timeline and new resources to deliver the restructuring plan at the end of September. We are grateful to our employees who are focussed on producing sugar as efficiently as possible. This plan will be critical in addressing our liquidity needs, reducing our debt to more sustainable levels and providing our employees and stakeholders with much-needed clarity. In the meantime, we remain committed to our employees, suppliers, customers, and wider stakeholders.”

“Tongaat’s request made to the JSE for the voluntary suspension of trading in our shares is a purely procedural decision which would protect shareholders and stakeholders as we engage widely to progress our restructuring plans. By progressing a comprehensive restructuring solution, we are working to create a long-term future for the company, and the half a million people which depend on it across Southern Africa,” Hudson continued.   

CHANGES TO THE BOARD AND BOARD COMMITTEES AND APPOINTMENT OF A CHIEF RESTRUCTURING OFFICER AND TERMINATION OF MAGISTER AGREEMENT

Tongaat Hulett has announced the establishment of a Restructuring Committee, an additional sub-committee of the board of directors of the Company.

The establishment of the Restructuring Committee and the appointment of the Chief Restructuring Officer are to intensify the focus on the turnaround of the Company, due to the delay in implementing the rights offer.

The primary responsibility of the Chief Restructuring Officer and the restructuring committee will be to further focus on developing solutions to reduce and repay debt to sustainable levels whilst improving the liquidity of the Company.

Piers Marsden has been appointed by the board as the Chief Restructuring Officer and a non-executive director of Tongaat Hulett. Piers is a specialist in improving corporate performance, executing corporate turnarounds, and restructuring corporate debt. He has previously acted on behalf of Cell C, Ascendis Health, Edcon, Highveld Steel & Vanadium and Optimum Coal amongst others. His focus areas have been in restructuring debt, recapitalising the companies, and implementing restructuring plans to deliver long-term sustainable growth and future value to all stakeholders.

This appointment will also provide Tongaat Hulett’s executives with additional capacity to focus on strategic progress, operational issues, and the day-to-day demands of managing the Group to deliver future value to all stakeholders.

 

Termination of Magister Transaction

On 16 November 2021, Tongaat Hulett entered into an Underwriting, Subscription and Relationship Agreement with Magister Investments Limited in relation to a potential equity capital raise (Underwriting Agreement).

A. The Underwriting Agreement was entered into subject to the fulfilment of certain conditions precedent (Conditions Precedent) on or prior to 30 June 2022.

B. Progress has been slowed by regulatory processes including a hearing required by certain shareholders before the Takeover Special Committee and longer than expected timelines in obtaining the approval of the Zimbabwean Competition and Tariff Commission.

C. As a result, these Conditions Precedent have not yet been fulfilled, and Tongaat Hulett and Magister do not anticipate that those Conditions Precedent will be fulfilled on or prior to 30 June 2022.

In order to avoid further regulatory delays, Tongaat Hulett and Magister have accordingly agreed to terminate the Underwriting Agreement. The agreement contemplated in the Magister Transaction, and in the circular to shareholders dated 15 December 2021 will accordingly not be implemented.

“Today, we have taken some very important steps to secure the future of this company in the light of the Magister development and as the delay in the rights offer requires us to bring in extra resources to further accelerate our restructuring plans,” said Gavin Hudson, CEO of Tongaat Hulett.   

The lender group remains supportive of Tongaat Hulett and the Company is currently engaging with them and other parties to provide liquidity which will provide us with additional time as we work to progress a comprehensive restructuring solution. The CRO we have appointed has a strong track record in turning around and restructuring companies for sustainable growth and we have a clear intent to move forward.” Hudson continued. 

“The accounting scandal that almost destroyed Tongaat Hulett has placed it in the situation it is in today and I am pleased to have been appointed to focus on helping save this national icon and play a part to returning it to a sustainable footing,” said Piers Marsden, Chief Restructuring Officer and a non-executive director of Tongaat Hulett.  “A significant amount of work has been done by the Board and the Executive over the past few months. The intent is to produce a plan quickly that considers all available options and provides clarity to stakeholders for the way forward.” 

As stated previously, Tongaat Hulett remains committed to a recapitalisation. The Company is continuing to proactively engage with stakeholders regarding a capital raise transaction and a sustainable solution for the group. There is a positive commitment from various stakeholders who recognise the critical social impact Tongaat Hulett has in South Africa and across the SADC region.

Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

Shareholders will be updated on further developments as and when they arise.

UPDATE ON DEBT NEGOTIATIONS AND DELAY TO PUBLICATION OF RESULTS

Tongaat Hulett continues work to find a sustainable financing solution for the Tongaat Hulett group. The Company continues to enjoy support from various stakeholders who recognise the critical social impact that Tongaat Hulett has in South Africa and across the SADC region.

As a key element of this restructuring, Tongaat had hoped to implement a rights offer in the first half of 2022. The delays arising from the action brought by the Artemis consortium before the Takeover Regulation Panel (TRP) and various competition authority approvals have shifted the timelines for completion of this process significantly.

The lender group remains supportive of Tongaat Hulett and the Company is currently engaging with them and other parties to provide liquidity which will provide us with additional time as we work to progress a comprehensive restructuring solution.

Despite our best efforts to meet the stipulated deadlines, Tongaat today advised its shareholders that the process to provide short-term liquidity is going to extend beyond 30 June 2022. As a result, Tongaat will not be able to release its financial statements for the year ended 31 March 2022 by 30 June 2022 as required by the JSE.

It is important to note that the financial statements for the year ended 31 March 2022 are not delayed due to any financial irregularities.

Tongaat remains committed to a recapitalisation and remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

“The recapitalisation process remains a critical focus for the Board and management team, as it will help protect more than half a million livelihoods across South Africa, Mozambique, Zimbabwe and Botswana. We remain committed to continuing this process and while we are making every effort to accelerate this, it is a complex and time-consuming process. I am pleased to say it is also one where we enjoy the support of our key stakeholders across all the countries we operate in,” said Gavin Hudson, CEO of Tongaat Hulett.    

THL is still party to an agreement with Magister which provides that THL will proceed with a rights offer partially underwritten by Magister. The agreement is subject to the fulfilment of certain conditions precedent by 30 June 2022. If those conditions precedent are fulfilled on a timely basis, then the agreement will be implemented. If they are not, then the agreement will not proceed.

Shareholders will be updated on further developments as and when they arise.

TONGAAT HULETT UPDATE ON TRP PROCESS AND PROPOSED RECAPITALISATION

Following its investigation, the Takeover Regulation Panel (TRP) issued a ruling on Friday 3 June withdrawing its previous determination in which it exempted Magister from the potential future obligation to make a mandatory offer to Tongaat shareholders as a consequence of it partially underwriting Tongaat Hulett’s proposed rights offer. The TRP investigation focused on whether a third-party who bought shares in Tongaat Hulett subsequent to the announcement of the rights offer is related to, and therefore deemed to be a concert party of, Magister. 

Tongaat was not a party to the share acquisition, nor were adverse findings made against Tongaat in the TRP ruling.

Magister has applied to the Takeover Special Committee (“TSC”) for a hearing regarding the TRP’s ruling.

THL resolved not to appeal the TRP ruling and will abide by the decision to be made by the TSC pursuant to Magister’s request for a hearing.

THL Shareholders are reminded that the transaction with Magister remains subject to the fulfilment by 30 June 2022 of certain conditions precedent including a TRP exemption to Magister from the potential future obligation to make a mandatory offer (which is the subject matter of Magister’s challenge to the TSC), the consent of THL’s South African lenders and approval from the Zimbabwean competition authorities.

Irrespective of the outcome, THL remains committed to a recapitalisation, and continues to engage proactively with a range of stakeholders on a sustainable capital structure for the THL group. Additionally, recapitalising Tongaat will protect more than half a million livelihoods.

THL Shareholders will be updated on further developments.

The operations of the company remain uninterrupted.

TONGAAT HULETT LIMITED – OUTCOME OF AN INVESTIGATION BY THE TAKEOVER REGULATION PANEL (“THE TRP”)

Following its investigation, the Takeover Regulation Panel (TRP) has issued a ruling withdrawing its previous determination in which it exempted Magister from the potential future obligation to make a mandatory offer to Tongaat shareholders as a consequence of it partially underwriting Tongaat Hulett’s proposed rights offer. The TRP investigation focused on whether a third-party who bought shares in Tongaat Hulett subsequent to the announcement of the rights offer is related to, and therefore deemed to be a concert party of, Magister. 

Tongaat was not a party to the share acquisition, nor were adverse findings made against Tongaat in the TRP ruling.

The operations of the company remain uninterrupted.

Each of Tongaat and Magister is entitled to appeal the ruling.

Tongaat is considering the ruling and will thereafter decide on its course of action and will make a further announcement in due course. 

An exemption from the potential future obligation to make a mandatory offer to Tongaat shareholders is a condition precedent to the Magister transaction. The ruling does not trigger an obligation on Magister to make a mandatory offer to Tongaat shareholders.

Tongaat remains committed to a recapitalisation. As noted in the announcement released on 31 May 2022, Tongaat is continuing to proactively engage with stakeholders regarding a capital raise transaction, and a sustainable funding solution for the Tongaat group.

There is positive commitment from various stakeholders who recognise the critical social impact THL has in South Africa and across the SADC region.

Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

THL BOARD CHAIRMAN TO STEP DOWN, INTERIM CHAIRMAN APPOINTED

Mr Louis von Zeuner, Chairperson and Non Executive Director of the Tongaat Hulett board, has regrettably informed the board that he will not be available for re-election as Chairman at this year’s AGM due to a change in his personal circumstances.

Mr von Zeuner has consequently resigned as Chairman, but will remain on the board to assist with a smooth transition and handover until 30 June 2022. Mr von Zeuner will also resign as an independent non-executive director of the Company effective 30 June 2022. The Board has begun the process to identify a suitable replacement and shareholders will be advised as soon as an appointment has been made.

As a result of Tongaat’s succession planning processes, a seamless transition to Mr David Noko, who will assume the role of interim Chairperson, has already begun. Mr Noko has served as lead Non-Executive Director on the Tongaat board since 1 July 2020 and is currently the Lead Independent Non-Executive Director.

Mr Noko has an HND in Mechanical Engineering, an MDP and an MBA, and is the lead advisor at his consultancy company, ESG Advisory Limited. He was Executive Vice President at AngloGold Ashanti and has served as CEO of Air Chefs and Managing Director and CEO of De Beers Consolidated Mines Limited. He served on the Boards of several prominent companies, is a Chartered Director, a member of the Institute of Directors and is Chairman of the Council of the University of the Free State.

Tongaat is a major regional sugar producer with operations in Zimbabwe, Botswana, Mozambique and South Africa. With over 26,000 employees, Tongaat also provides a livelihood to more than 20,000 cane growers. The priority of the board during this transition period remains on steering the company with the support of shareholders and lenders to provide a sustainable future for all its stakeholders.

Tongaat Hulett CEO Gavin Hudson said: “On behalf of the board and executive team of Tongaat Hulett, we wish to sincerely thank Mr von Zeuner for his exceptional leadership, guidance and support during the difficult time that THL faced when he took over the role as Chairman. We wish him every success in his future endeavours. In welcoming Mr Noko as the interim Chairman, we take comfort that our efforts to complete the turnaround and recapitalisation will benefit from an exceptional depth of management expertise on the Board. We remain committed to the recapitalisation process, which we believe will protect intrinsic shareholder value and create a legacy for the half a million people dependent on the existence of Tongaat Hulett across the Southern Africa Development Community. Our engagement with lenders, shareholders and regulators to bring this to fruition continues.”

INVESTING IN THE FUTURE OF THE SA SUGAR INDUSTRY THROUGH SKILLS DEVELOPMENT

The challenges facing the SA sugar industry have received significant coverage over the past few years. Over 1 million South African’s are however reliant on the SA sugar industry along its value chain and Tongaat Hulett is committed to helping secure its long term success.

In the 2021/22 season the milling operations were negatively impacted by the numerous breakdowns at all three raw sugar mills due to a COVID-impacted maintenance shut before the start of the season, the unrest in KwaZulu-Natal during July 2021 and the challenges experienced in processing sugarcane that had been subject to the unrest-related arson.

 

Tongaat Hulett has taken decisive steps to address these challenges, with its annual maintenance shutdown proceeding well. The focus was on addressing all the major issues that affected milling performance from a miller’s point of view.

This offcrop included a great focus on planning and extensive oversight on the execution of the maintenance work. Another key focus in securing the future of Tongaat Hulett is in ensuring that its employees have the right skills and capacity to ensure that the milling season is successful.

This focus on training and development spans across the various levels of the organisation. Some of the programs include Engineer in Training (EIT), operator training and Supervisory, Management and Leadership development though Tongaat Hulett’s accredited Management Development and Supervisory Development Programs.

Earlier this year Tongaat Hulett Sugar SA rolled out refresher training for all Sugar Milling Operators in Process and Boilers. The seven day Sugar Process Refresher Training took place at each of Tongaat’s three SA mills, training approximately 270 Operators in preparation for the upcoming milling season.

As part of Tongaat’s focus on continuous improvement, this training aimed to upskill all Operators to improve production efficiency and performance and was facilitated by subject matter experts.

In addition to Operator specific training, the program included information on the sugar industry, global sugar trends, the sugar production process and insights on the supply chain. In addition, the process provided an opportunity for Operator feedback on key challenges and areas for improvement.

MD of Tongaat Hulett Sugar SA, Dave Howells said, “Investing in our people is essential for us to have a successful business and a sustainable future. We look forward to working together with our teams at each site and our supplying growers to ensure a successful upcoming season.”

PROGRESS IN CRIMINAL CASE AGAINST FORMER TONGAAT EXECUTIVES AND FORMER DELOITTE AUDIT PARTNER IN RELATION TO FRAUD CHARGES

Tongaat Hulett has been informed by the National Prosecuting Authority (NPA) that seven individuals, including six former company executives, appeared in the Durban commercial crime court on Thursday 10 February in relation to fraud charges. The seventh individual, Gavin Kruger, was the Deloitte audit partner on the Tongaat Hulett audit and at all times employed by Deloitte. All those charged were granted bail.

Late in 2019, Tongaat laid criminal charges against former executives identified for their role in undesirable accounting practices as a result of the PwC forensic investigations. The charges stem from alleged fraudulent activity which took place between March 2015 and September 2018, which saw the suspects cooperate to backdate land sale agreements. The backdated sale agreements had a significant impact on the Company’s financial results.

The PwC forensic investigations identified that certain senior executives initiated or participated in undesirable accounting practices which resulted in the company’s profits being overstated over a number of years. This led to the loss of value to our shareholders and many of our other stakeholders.

Additionally, civil proceedings brought by the company against four former executives during 2020 are also underway, and Tongaat Hulett will update on developments in this regard when appropriate. 

The former Tongaat Executives who appeared were Peter Staude, Murray Munro, Michael Deighton, Rory Wilkinson, Kamlasagrie Singh and Samantha Shukla. 

Tongaat Hulett Company Secretary, Johann van Rooyen said: “Tongaat Hulett welcomes this development in the legal process and it will continue to cooperate with law enforcement authorities whenever required to ensure that those responsible for the historic mismanagement of Tongaat Hulett are held accountable.”

The case was postponed to April 11, when it is expected to resume in the high court.

Further information:

NPA statement: https://twitter.com/NPA_Prosecutes/status/1491727913120632838

PwC investigation: https://www.tongaat.com/key-findings-of-pwc-investigation/

Key findings of the PwC investigation: https://www.tongaat.com/wp-content/uploads/2019/11/Key-findings-of-PwC-Investigations-29-Nov-2019.pdf

Civil cases again former Tongaat executives: https://www.tongaat.com/tongaat-hulett-seeks-r450-million-in-civil-claims-against-former-executives/

TONGAAT HULETT DONATES UNIFORMS TO DESERVING PUPILS

 

Disadvantaged pupils in the Hambanathi community on the KwaZulu-Natal North Coast have commenced school all togged up in brand new uniforms provided by agri-business giant, Tongaat Hulett.

The pupils, who attend Nkosibomvu High School, were thrilled when they were presented with new uniforms and shoes and were full of praise for the generous donation by Tongaat Hulett.

The deserving pupils had been badly-impacted when their parents lost their jobs during the COVID-19 lockdown. Parents have had to decide whether to use their available limited resources to put food on the table or purchase uniforms.

Since food is a greater priority, many pupils struggled to secure much-needed resources, including school uniforms. 

Since many schools were closed during the lockdown, pupils in the majority of the communities where Tongaat Hulett operates had to rely on their own resources to continue learning remotely or through pupil-led study groups.

Mrs Rachel Lindiwe Xulu, a teacher at Nkosibomvu High School, said the school recorded an increased number of pupils with school uniforms in poor condition in 2021.

“Most parents had lost their jobs during the lockdown period. I contacted Tongaat Hulett, who did not hesitate to support the indigent pupils. The donation of school uniforms will ensure that the pupils have a good start in 2022. Parents will not have to worry about buying school uniforms with their meagre resources,” said Mrs Xulu.

Thabile Magwaza, chairperson of the school’s governing body, thanked Tongaat Hulett for supporting the school and for investing in the future of the pupils.

Nkonzo Mhlongo, Tongaat Hulett’s socio-economic development manager, said over the past eight years, the company’s back to school campaign has seen more than 3, 000 pupils benefitting.

“It is widely recognised that school uniforms contribute to an improved culture of learning in schools as it builds a sense of pride, increases pupil attendance, and increases attention in the classroom as pupils are not concerned about what other students are wearing. In addition, Tongaat Hulett has committed to working with a wide range of stakeholders to support communities negatively affected by COVID-19. Already in partnership with other stakeholders, about 250, 000 litres of sanitiser have been donated to the KZN Department of Health and 60 tons of instant porridge has been distributed in affected communities. We will continue to monitor and respond to the COVID-19-related impacts within our communities. Our priority is the health and wellbeing of our employees and the communities in the areas in which the company operates,” said Mhlongo.

Source: https://northcoastrisingsun.co.za/117140/tongaat-hulett-donates-uniforms-to-deserving-pupils/

 

TONGAAT HULETT RECAPITALISATION WINS SHAREHOLDER APPROVAL

Tongaat Hulett announced today that the proposed major recapitalisation via a rights offer, was overwhelmingly supported by shareholders at a special general meeting held earlier.

Tongaat Hulett CEO 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.”

Update on timing

The rights offer can only proceed once all lender and regulatory approvals are obtained and other conditions precedent are fulfilled, all of which are in progress and are expected by the end of March 2022.

The discount at which the company’s shares will be offered will be determined by the Board having regard to market conditions and investor demand. The Board is aware of concerns regarding the level of the discount that may arise and will act in in the best interests of shareholders and other stakeholders, taking into account the need for fresh capital. There are numerous precedents in the South African market regarding typical discount levels, and the Board will consider comparable recent transactions when making a determination. The discount will be no less than 15% to the 30-day volume-weighted average price of the company’s share at the time the rights offer price is announced.