This move brings Vision Consortium one step closer to completing the full acquisition of the group’s operations and assets.
Tongaat Hulett’s business rescue practitioners (BRPs) confirmed in a statement that South African banks and other members of the lender group had received the outstanding balance of funds from Vision, marking a “significant step forward” in the implementation of the company’s adopted business rescue plan.
“This represents a significant step forward in the successful implementation of the business rescue plan and reinforces the BRPs’ confidence in the company’s ongoing viability,” the statement said.
Now that all necessary approvals from competition authorities have been secured, the payment clears the path for the final phase of the ‘alternative transaction’, which includes the sale of Tongaat’s sugar and animal feed businesses to the Vision Consortium after shareholders rejected a previously proposed equity deal.
Tongaat Hulett entered business rescue in October 2022 following a dramatic financial collapse triggered by years of ballooning debt, alleged accounting fraud, and executive mismanagement.
The company lost R12 billion in value due to alleged financial misstatements under its previous leadership, putting the livelihoods of thousands of workers, farmers, and suppliers at risk.
Dave Howells, managing director of Tongaat Hulett’s South African Sugar business, said: “The immensity of the challenge it then faced cannot be overstated: avoiding liquidation, stabilising operations, and, most importantly, protecting the thousands whose livelihood is and remains tied to its sugar and animal feed businesses.”
Despite civil and criminal proceedings against former executives still pending, the company has made substantial progress through the business rescue process, including keeping operations afloat and maintaining employment.
The Vision Consortium emerged as the only viable suitor for Tongaat Hulett after a rival bid by the RGS Consortium was withdrawn just before a scheduled vote on two competing rescue plans in January 2024. Creditors overwhelmingly backed the Vision plan, with 98,5% of the vote in favour.
Initially, Vision proposed acquiring a controlling stake in Tongaat in exchange for fresh capital, leaving current shareholders with a diluted 2,7% stake.
But when shareholders refused to support this preferred equity transaction, the BRPs were legally obligated to implement the plan’s alternative of selling all of Tongaat’s operations to Vision outright.
Despite legal challenges and delays, some of them branded “vexatious” by the BRPs, the KwaZulu-Natal High Court has upheld the Vision plan, allowing its implementation to continue.
A key part of Tongaat’s survival over the past three years has been its ability to maintain operations at its Maidstone, Amatikulu, and Felixton mills, along with its refinery and animal feeds business, according to Howells.
This was made possible by crucial post-commencement funding from the Industrial Development Corporation, and extensive maintenance investments. The company spent R1,425 billion on essential off-crop maintenance since entering business rescue, with R460 million allocated in the current season alone to ensure its facilities are cane-ready.
“Tongaat Hulett continues to operate effectively and is firmly on the road to recovery in anticipation of the successful implementation of its business rescue plan,” Howells said.
Stakeholders are optimistic that the deal will mark the beginning of a long-term recovery for a company that plays a vital economic role in KwaZulu-Natal, Zimbabwe, Mozambique, and Botswana.
“Currently, the business is well positioned to continue its transition toward a stable and sustainable future under the eventual ownership of Vision,” Howells said. “Once Tongaat’s business is transferred to Vision, we are confident that the turnaround and strategic repositioning of Tongaat Hulett’s business will continue.”
