South African sugar growers-led consortium seeks to buy Tongaat Hulett’s assets

SOUTH AFRICA – Struggling sugar processor Tongaat Hulett, has gotten a suitor willing to rescue the company from its piling debt.

According to reports by Engineering News, a consortium comprising the sugarcane growers that supply the company has submitted an expression of interest to its business rescue practitioners (BRPs) to acquire Tongaat’s South African assets.

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; and all associated brands and trademarks.

If the acquisition is approved, the assets will be held by an unlisted limited liability company or NewCo.

“The offer is made on behalf of growers delivering more than five-million tons of sugarcane to the Tongaat Hulett mills in the North Coast of KwaZulu-Natal in order to ensure the survival of these farming operations, the thousands of livelihoods they support and socio-economic stability for the greater region,” NewCo spokesperson Simon Cleasby said in a statement on November 30.

Agreements would need to be signed expeditiously to enable off-crop maintenance to be completed in time to ensure that the mills are operational for the 2023/24 season, he emphasised.

The proposal is underpinned by a vision of an inclusive, collective investment in the assets of NewCo, which will be held by all Tongaat Hulett-supplying growers in a single investment vehicle with a majority shareholding for supplying black growers.

This will ensure that newly formed entity meets the industry’s transformation objectives in the long term.

Further, as small-scale growers are generally unable to securitise land, alternate funding methods will need to be explored in order to achieve this vision, the consortium said.

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.

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 noted.

With no long-term solution to the Tongaat Hulett milling crisis having been found to date, and in an attempt to save an entire region, NewCo represents one of the few viable opportunities to save more than 11 000 small-scale growers, more than 20 000 jobs in the cane growing sector alone, and a significantly greater number of indirect job losses in the region.

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, the growers’ consortium noted.

“The experienced and diversely skilled consortium leadership appreciate that the drivers and competencies of sugarcane agriculture are different to sugar milling.

“There will, therefore, be a separation of roles and responsibilities between cane growing and milling/refining to ensure that milling operations are optimised and sustainable over the long term,” Cleasby said.

NewCo will seek to maximise the potential synergies with growers to achieve greater efficiency in milling, aligning the objectives of millers and growers to deliver optimal decision-making and operational performance, he added.

“The consortium leadership has taken the first profound steps in a long and complex process. The consortium is committed to exploring every possible avenue to save the operations of Tongaat, protecting thousands of desperately needed livelihoods on the North Coast of KwaZulu-Natal.

“With the full support of the grower community and value chain stakeholders, the consortium is optimistic that government, banks and other stakeholders will work with us to ensure the best possible outcome for growers, workers and value chain partners in the local sugar industry.

“This will ensure the Tongaat Hulett mills continue to operate and process sugar supplied by growers in the surrounding areas,” the growers said.

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