USA based Lusitania Investment Capital eyes Tongaat Hulett’s operations in Mozambique

MOZAMBIQUE – The American company, Lusitania Investment capital LLC, has showcased interest of acquiring assets of Indebted sugar producer Tongaat Hulett in Mozambique.

According to reports by Club of Mozambique, Lusitania has presented an offer of about R3.5 billion (US$218m) for majority stakes in the sugar cane plantations and the sugar factories of Xinavane and Mafambisse.

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Tongaat Hulett holds 85 per cent of the shares in the Mafambisse company and 88 per cent in Xinavane. The rest of the shares are held by the Mozambican state through IGEPE (Institute for the Management of State Holdings).

The Xinavane mill is the largest sugar producer in Mozambique with an installed capacity to produce 250,000 tonnes a year while Mafambisse has the capacity to produce 92,000 tonnes.

This offer comes at a time when the South African group has to deal with a cumulative debt of 6.8 billion rand (US$424 million).

While the Tongaat hulett Board has yet to formally react to this proposal, the prospect that it can halve its financial burden should help with the decision.

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The sugar processor recently had to pause its planned R5 billion (US$325m) right issue that had included Mauritius-based Magister, who had committed to underwrite R2bn (US$125m) of the rights offer, but had made this conditional on receiving a regulatory waiver exempting it from making a formal offer for all of the shares.

However, the plan hit a snag as South Africa’s Takeover Regulatory Panel removed a previously granted exemption for the company from the obligation to make a mandatory offer to its shareholders.

SA company law requires if any company and any party act in concert and buy more than 35% of a company, then the company will have to make an offer to buy all its shareholders out. But one of Magister’s conditions was that Tongaat wouldn’t make such an offer.

In January, Tongaat’s shareholders waived their right to the buy-out offer by means of a vote. But some minority shareholders protested that close associates of Magister had bought up Tongaat shares ahead of the vote to help sway the outcome.

The TRP looked into the issue and found that the associates and Magister were acting in concert, resulting in the authority cancelling the waver.

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With the right issue hitting a speed bump, Tongaat might be forced to raise capital through offloading its assets as it has previously done with sale of its starch business in South Africa to Barloworld and sale of sugar packaging and distribution business in Namibia to Bokomo company.

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