SOUTH AFRICA – Rand Merchant Bank (RMB) and Nedbank have acquired a major shareholding in South Africa sugar producing company, Tongaat Hulett after the firm was compelled to unwind its empowerment deal.
Tongaat said in a statement that RMB and Nedbank exercised their rights in terms of the Broad- Based Black Economic Empowerment (BBBEE) funding agreement to acquire 23.4-million Tongaat shares, reports business Day.
Each of the two firms will acquire a 9.07% stake, which is equivalent to 12.3-million shares and at the current share price is worth about US$18.09 million (R258m) making each of the two banks major shareholders in Tongaat.
However, at the time the BBBEE transaction was initially put in place, in June 2007, the deal was valued at billions of rand.
The banks have taken an undisclosed hit on their funding of the Tongaat BBBEE deal and have forced the deeply indebted transaction to be unwound.
The deal has seen Infrastructure SPV and yoMoba SPV offload a 10.08% and 8.06% interest in the ordinary shares of Tongaat Hullet respectively.
“The transfer of securities will not adversely affect Tongaat Hulett’s B-BBEE ownership score,” Tongaat said in a statement.
Tongaat has had no dominant shareholder since it was unbundled from Anglo American several years, in which two trusts representing communities in certain of Tongaat’s land conversion and cane growing areas held a 70%.
The two strategic partners to the BBBEE deal, Ayavuna Women’s Investments and Sangena Capital, held the remaining combined 30% of the BBBEE stake and were represented on the Tongaat board.
Ayavuna and Sangena contributed US$1.26 million (R18m) to the funding requirements while no funds were invested by the community trusts.
In July 2014, a share repurchase calculation, performed in line with the terms of the BBBEE transaction, concluded the share price had not appreciated sufficiently over the seven-year vesting period.
At that stage, the company said in the statement, it decided to extend the deadline for the transaction to January 31 2019 “in order to facilitate the possibility of a restructure”.
In April RMB and Nedbank exercised their rights to acquire the BBBEE shares and informed the company they were in the process of transferring the shares into their own names.