Tongaat Hulett still in danger of being delisted from the JSE
The triggering of a mandatory offer to shareholders in Tongaat Hulett by the proposed equity subscription in the business rescue plan of the JSE-listed sugar and property developer might be the death knell of the company as a listed entity.
The bid by Robert Gumede’s Vision Group for the financially-distressed suspended company was overwhelmingly approved in January.
The group’s business rescue plan, which will lead to a significant dilution in value for shareholders, included:
The intention is that, among other things, this will result in the:
The about R5 billion of Tongaat’s debt to be exchanged is a portion of the debt owed by the company to the bank lender group and which has been acquired collectively by Vision Investments.
Tongaat and Vision Investments said on Wednesday this transaction essentially strengthens Tongaat’s balance sheet by almost R5 billion and is a material step contemplated in the implementation of the approved Tongaat business rescue plan.
However, they said: “Although Vision wishes to retain Tongaat’s listed status, in the event of the shareholders rejecting the equity subscription, a sale of assets will be pursued.”
They added: “It is also possible that a potential mandatory offer, on terms acceptable to Vision, could result in minority shareholders being bought out and then Tongaat being delisted.
“The first step is however to contemplate the equity subscription, which is what the currently approved business rescue plan contemplates.”
Tongaat and Vision Investments added that the equity subscription is subject to a number of suspensive conditions in addition to the support of Tongaat’s shareholders.
These suspensive conditions include the:
The implementation of the equity subscription by Vision Investments will result in it owning 97.3% of the total issued share capital of Tongaat.
The equity claim is to be disposed of by Vision Investments to Tongaat in exchange for the shares, with about 4.86 billion shares issued.
This represents the maximum number of shares available for issue based on the current number of authorised but unissued shares of Tongaat.
Tongaat and Vision Investments said that based on the value of the equity claim at the signature date of the equity subscription agreement, a deemed share price of 101 cents per share can be mathematically calculated.
However, they said the deemed share price has not been arrived at through any empirical determination of fair value, given the financial distress faced by the company, but rather as the total quantum of debt required to be extinguished through the issue of the maximum number of available new shares to restore the company to solvency.
Tongaat and Vision said it is the view of the Vision parties that a deemed share price of 101 cents per share is not representative of the fair value per share.
“If a mandatory offer were to be triggered following the implementation of the equity subscription, the mandatory offer price would be determined based on the fair value per share and not on the deemed share price of 101 cents per share,” they said.
The 30-day weighted average trading price of the shares is not available because Tongaat has been suspended from trading on the JSE since July 2022.
Tongaat and Vision Investments added that should the exchange of the debt for equity not be approved by shareholders, the approved business rescue plan for Tongaat provides for an alternative mechanism to transfer ownership of the company’s assets and businesses to Vision Investments.
“In the alternative mechanism, a shareholder vote will not be required,” it said.
“Post transfer of ownership of the Tongaat assets and businesses to Vision, the Tongaat shares would have no value and are unlikely to trade again, with a delisting being the final outcome.”