TONGAAT HULETT PROPERTY, FUNDAMENTUM AND THE ETHEKWINI MUNICIPALITY PARTNER TO UNLOCK SHONGWENI’S POTENTIAL

A new catalytic project in Durban’s outer west region deploys innovative thinking that combines the efforts of the public and private sector to create long-term value for all stakeholders. 

The Shongweni Urban Core transaction, between local development company Fundamentum Property Group and Tongaat Hulett, with strong support of the eThekwini Municipality, will see a multi-phased development of Shongweni’s Urban Core, the new city of Westown.

This trigger phase  of the Shongweni Urban Development, Westown, is a mixed-use precinct of urban and green spaces centred around the new retailing hub of Westown Square. This will be followed by a variety of other uses including residential, logistics, recreational, warehousing and leisure components.

Tongaat Hulett will benefit from sustained value creation over time, boosting the Company’s strategy of evolving from outright property sales to earning annuity income from its property portfolio. The nature of the transaction is a 99-year lease,  an approach similar to the Waterfall development in Gauteng. This approach  allows Tongaat Hulett to retain ownership of the land, and be entitled to annuity income from the residential, commercial and mixed-use properties.

As the landowner, Tongaat Hulett, in partnership with Fundamentum as the Westown developer, is responsible for the Shongweni Urban Development’s overall development vision and framework plan that aligns with public sector policy, plans and objectives. This vision extends to creating compelling and tailored real estate solutions for developers, investors, local community participants, future residents and end users within the Shongweni Urban Development.

With the conclusion of this first alternative and innovative transaction, Fundamentum will oversee and manage all aspects of the development of Westown as it is developed over multiple phases and years.

Westown is the focus of this transaction, with current development rights for 517 000 bulk square metres. The retail offering of Westown Square see the first phase of 45 000m² of development rights taken up alongside a new 100-bed private hospital. This will be closely followed by commercial/business and residential developments within Westown.

Key to unlocking the development of Westown is a required infrastructure investment of circa R730million over the next 3years with the eThekwini Municipality committing to supporting this Catalytic Project with an initial R595 million.

The 99-year lease mechanism will, over time, deliver value in excess of the land value whilst retaining the asset of the land. The commitment by eThekwini and Fundamentum for infrastructure development removes a large obligation for the Group, both from a cash flow and a resource point of view. In addition, the development of Westown will have significant benefit for the balance of the 2 000ha Shongweni Urban Development, and will act as a catalyst for the further development of industrial, lifestyle residential and other uses.

Mtura Matshini, Tongaat Property Development Executive said: “The Shongweni Urban Development project represents an innovative partnership between local government and the private sector. In overcoming the current challenging economic environment, the partners have produced a solution which transforms a key part of the Tongaat property portfolio into an annuity generating asset. In harnessing our expertise in development, the entrepreneurial agility of Fundamentum, and the support on infrastructure from the eThekwini Municipality, the project will act as a catalyst to benefit the people of Shongweni for years to come.”

For more information, contact: Mtura Matshini @ mtura.matshini@tongaat.com

 

TONGAAT HULETT SHARES SUSPENDED FROM TRADING

The JSE today notified Tongaat Hulett of its decision to suspend trading in the Company’s shares.

On 15 July 2022, Tongaat advised shareholders that it had voluntarily approached the JSE and requested a temporary suspension of the Company’s shares due to delays in the publication of the Provisional 2022 Financial Statements and the Audited 2022 Financial Statements.

The JSE declined the request to voluntarily suspend the share. They advised that the basis for suspending trade would be non-compliance with sections 3.16 and 3.17 of the Requirements in respect of the timeous publication and dissemination of provisional results. The JSE also cited Tongaat’s confirmation that it cannot comply with sections 3.19 and 3.23 of the Requirements, as the Company will not publish its annual integrated report by the due date of 30 July 2022.

The suspension has no material impact on the company’s financial stability or its business operations.

The Company expects trading in its shares to be reinstated once financial results are published.  

 

RESTRUCTURING PLAN TIMIMG SET; REQUEST MADE TO JSE TO SUSPEND SHARE TRADING

Tongaat Hulett today informed shareholders that the company’s newly established restructuring committee will present the restructuring plan to the Tongaat board by 30 September 2022. The comprehensive restructuring plan seeks to improve liquidity levels, reduce debt to sustainable levels and provide clarity on a way forward for the company to all stakeholders.

As both the Board and the auditor need more certainty around the debt refinancing and balance sheet restructuring, Tongaat is unable to release its provisional annual financial results for the financial year ended 31 March 2022 by 30 June 2022 as required by the JSE.

A longer-term financial solution is required for Tongaat Hulett’s audited annual financial statements to be finalised, and this is largely dependent on the outcome of the restructuring plan. While every effort is being made to finalise the restructuring plan as soon as possible, it is clear that neither the Provisional 2022 Financial Statements nor the Audited 2022 Financial Statements will be finalised by 31 July 2022.

As a longer-term financial solution is required for the results to be released, Tongaat has applied to the JSE to have trading in its shares voluntarily suspended. A suspension would protect the interests of current and potential shareholders as the company engages with multiple parties on solutions to progress the restructuring.

The JSE issued a SENS earlier today confirming that it is considering the request for suspension received from the Board and stating that it will communicate its decision on the possible suspension as soon as possible.

A suspension would have no material impact on the company’s financial stability or its business operations.

To allow sufficient time and resources to complete the restructuring plan, the Company is in final negotiations with the South African lender group to replace the Company’s seasonal overdraft facility with a larger short-term ‘borrowing base’ liquidity facility.

The lender group remains supportive of Tongaat Hulett and we are currently engaging with them and other parties to provide liquidity, giving us additional time to work to progress a comprehensive restructuring solution.

The company is committed to open and transparent engagement with all its stakeholders, and to working to resolve the challenges that confront this critically important business.  

Shareholders will be updated on developments and further announcements will be made as and when appropriate.

Gavin Hudson, CEO of Tongaat Hulett said: “We have generated further momentum in the restructuring process with a clear timeline and new resources to deliver the restructuring plan at the end of September. We are grateful to our employees who are focussed on producing sugar as efficiently as possible. This plan will be critical in addressing our liquidity needs, reducing our debt to more sustainable levels and providing our employees and stakeholders with much-needed clarity. In the meantime, we remain committed to our employees, suppliers, customers, and wider stakeholders.”

“Tongaat’s request made to the JSE for the voluntary suspension of trading in our shares is a purely procedural decision which would protect shareholders and stakeholders as we engage widely to progress our restructuring plans. By progressing a comprehensive restructuring solution, we are working to create a long-term future for the company, and the half a million people which depend on it across Southern Africa,” Hudson continued.   

CHANGES TO THE BOARD AND BOARD COMMITTEES AND APPOINTMENT OF A CHIEF RESTRUCTURING OFFICER AND TERMINATION OF MAGISTER AGREEMENT

Tongaat Hulett has announced the establishment of a Restructuring Committee, an additional sub-committee of the board of directors of the Company.

The establishment of the Restructuring Committee and the appointment of the Chief Restructuring Officer are to intensify the focus on the turnaround of the Company, due to the delay in implementing the rights offer.

The primary responsibility of the Chief Restructuring Officer and the restructuring committee will be to further focus on developing solutions to reduce and repay debt to sustainable levels whilst improving the liquidity of the Company.

Piers Marsden has been appointed by the board as the Chief Restructuring Officer and a non-executive director of Tongaat Hulett. Piers is a specialist in improving corporate performance, executing corporate turnarounds, and restructuring corporate debt. He has previously acted on behalf of Cell C, Ascendis Health, Edcon, Highveld Steel & Vanadium and Optimum Coal amongst others. His focus areas have been in restructuring debt, recapitalising the companies, and implementing restructuring plans to deliver long-term sustainable growth and future value to all stakeholders.

This appointment will also provide Tongaat Hulett’s executives with additional capacity to focus on strategic progress, operational issues, and the day-to-day demands of managing the Group to deliver future value to all stakeholders.

 

Termination of Magister Transaction

On 16 November 2021, Tongaat Hulett entered into an Underwriting, Subscription and Relationship Agreement with Magister Investments Limited in relation to a potential equity capital raise (Underwriting Agreement).

A. The Underwriting Agreement was entered into subject to the fulfilment of certain conditions precedent (Conditions Precedent) on or prior to 30 June 2022.

B. Progress has been slowed by regulatory processes including a hearing required by certain shareholders before the Takeover Special Committee and longer than expected timelines in obtaining the approval of the Zimbabwean Competition and Tariff Commission.

C. As a result, these Conditions Precedent have not yet been fulfilled, and Tongaat Hulett and Magister do not anticipate that those Conditions Precedent will be fulfilled on or prior to 30 June 2022.

In order to avoid further regulatory delays, Tongaat Hulett and Magister have accordingly agreed to terminate the Underwriting Agreement. The agreement contemplated in the Magister Transaction, and in the circular to shareholders dated 15 December 2021 will accordingly not be implemented.

“Today, we have taken some very important steps to secure the future of this company in the light of the Magister development and as the delay in the rights offer requires us to bring in extra resources to further accelerate our restructuring plans,” said Gavin Hudson, CEO of Tongaat Hulett.   

The lender group remains supportive of Tongaat Hulett and the Company is currently engaging with them and other parties to provide liquidity which will provide us with additional time as we work to progress a comprehensive restructuring solution. The CRO we have appointed has a strong track record in turning around and restructuring companies for sustainable growth and we have a clear intent to move forward.” Hudson continued. 

“The accounting scandal that almost destroyed Tongaat Hulett has placed it in the situation it is in today and I am pleased to have been appointed to focus on helping save this national icon and play a part to returning it to a sustainable footing,” said Piers Marsden, Chief Restructuring Officer and a non-executive director of Tongaat Hulett.  “A significant amount of work has been done by the Board and the Executive over the past few months. The intent is to produce a plan quickly that considers all available options and provides clarity to stakeholders for the way forward.” 

As stated previously, Tongaat Hulett remains committed to a recapitalisation. The Company is continuing to proactively engage with stakeholders regarding a capital raise transaction and a sustainable solution for the group. There is a positive commitment from various stakeholders who recognise the critical social impact Tongaat Hulett has in South Africa and across the SADC region.

Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

Shareholders will be updated on further developments as and when they arise.

UPDATE ON DEBT NEGOTIATIONS AND DELAY TO PUBLICATION OF RESULTS

Tongaat Hulett continues work to find a sustainable financing solution for the Tongaat Hulett group. The Company continues to enjoy support from various stakeholders who recognise the critical social impact that Tongaat Hulett has in South Africa and across the SADC region.

As a key element of this restructuring, Tongaat had hoped to implement a rights offer in the first half of 2022. The delays arising from the action brought by the Artemis consortium before the Takeover Regulation Panel (TRP) and various competition authority approvals have shifted the timelines for completion of this process significantly.

The lender group remains supportive of Tongaat Hulett and the Company is currently engaging with them and other parties to provide liquidity which will provide us with additional time as we work to progress a comprehensive restructuring solution.

Despite our best efforts to meet the stipulated deadlines, Tongaat today advised its shareholders that the process to provide short-term liquidity is going to extend beyond 30 June 2022. As a result, Tongaat will not be able to release its financial statements for the year ended 31 March 2022 by 30 June 2022 as required by the JSE.

It is important to note that the financial statements for the year ended 31 March 2022 are not delayed due to any financial irregularities.

Tongaat remains committed to a recapitalisation and remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

“The recapitalisation process remains a critical focus for the Board and management team, as it will help protect more than half a million livelihoods across South Africa, Mozambique, Zimbabwe and Botswana. We remain committed to continuing this process and while we are making every effort to accelerate this, it is a complex and time-consuming process. I am pleased to say it is also one where we enjoy the support of our key stakeholders across all the countries we operate in,” said Gavin Hudson, CEO of Tongaat Hulett.    

THL is still party to an agreement with Magister which provides that THL will proceed with a rights offer partially underwritten by Magister. The agreement is subject to the fulfilment of certain conditions precedent by 30 June 2022. If those conditions precedent are fulfilled on a timely basis, then the agreement will be implemented. If they are not, then the agreement will not proceed.

Shareholders will be updated on further developments as and when they arise.

TONGAAT HULETT UPDATE ON TRP PROCESS AND PROPOSED RECAPITALISATION

Following its investigation, the Takeover Regulation Panel (TRP) issued a ruling on Friday 3 June withdrawing its previous determination in which it exempted Magister from the potential future obligation to make a mandatory offer to Tongaat shareholders as a consequence of it partially underwriting Tongaat Hulett’s proposed rights offer. The TRP investigation focused on whether a third-party who bought shares in Tongaat Hulett subsequent to the announcement of the rights offer is related to, and therefore deemed to be a concert party of, Magister. 

Tongaat was not a party to the share acquisition, nor were adverse findings made against Tongaat in the TRP ruling.

Magister has applied to the Takeover Special Committee (“TSC”) for a hearing regarding the TRP’s ruling.

THL resolved not to appeal the TRP ruling and will abide by the decision to be made by the TSC pursuant to Magister’s request for a hearing.

THL Shareholders are reminded that the transaction with Magister remains subject to the fulfilment by 30 June 2022 of certain conditions precedent including a TRP exemption to Magister from the potential future obligation to make a mandatory offer (which is the subject matter of Magister’s challenge to the TSC), the consent of THL’s South African lenders and approval from the Zimbabwean competition authorities.

Irrespective of the outcome, THL remains committed to a recapitalisation, and continues to engage proactively with a range of stakeholders on a sustainable capital structure for the THL group. Additionally, recapitalising Tongaat will protect more than half a million livelihoods.

THL Shareholders will be updated on further developments.

The operations of the company remain uninterrupted.

TONGAAT HULETT LIMITED – OUTCOME OF AN INVESTIGATION BY THE TAKEOVER REGULATION PANEL (“THE TRP”)

Following its investigation, the Takeover Regulation Panel (TRP) has issued a ruling withdrawing its previous determination in which it exempted Magister from the potential future obligation to make a mandatory offer to Tongaat shareholders as a consequence of it partially underwriting Tongaat Hulett’s proposed rights offer. The TRP investigation focused on whether a third-party who bought shares in Tongaat Hulett subsequent to the announcement of the rights offer is related to, and therefore deemed to be a concert party of, Magister. 

Tongaat was not a party to the share acquisition, nor were adverse findings made against Tongaat in the TRP ruling.

The operations of the company remain uninterrupted.

Each of Tongaat and Magister is entitled to appeal the ruling.

Tongaat is considering the ruling and will thereafter decide on its course of action and will make a further announcement in due course. 

An exemption from the potential future obligation to make a mandatory offer to Tongaat shareholders is a condition precedent to the Magister transaction. The ruling does not trigger an obligation on Magister to make a mandatory offer to Tongaat shareholders.

Tongaat remains committed to a recapitalisation. As noted in the announcement released on 31 May 2022, Tongaat is continuing to proactively engage with stakeholders regarding a capital raise transaction, and a sustainable funding solution for the Tongaat group.

There is positive commitment from various stakeholders who recognise the critical social impact THL has in South Africa and across the SADC region.

Tongaat remains firmly of the view that a capital raise is a better alternative to strategic asset disposals, particularly an accelerated disposal programme which is unlikely to realise full value for the assets.

THL BOARD CHAIRMAN TO STEP DOWN, INTERIM CHAIRMAN APPOINTED

Mr Louis von Zeuner, Chairperson and Non Executive Director of the Tongaat Hulett board, has regrettably informed the board that he will not be available for re-election as Chairman at this year’s AGM due to a change in his personal circumstances.

Mr von Zeuner has consequently resigned as Chairman, but will remain on the board to assist with a smooth transition and handover until 30 June 2022. Mr von Zeuner will also resign as an independent non-executive director of the Company effective 30 June 2022. The Board has begun the process to identify a suitable replacement and shareholders will be advised as soon as an appointment has been made.

As a result of Tongaat’s succession planning processes, a seamless transition to Mr David Noko, who will assume the role of interim Chairperson, has already begun. Mr Noko has served as lead Non-Executive Director on the Tongaat board since 1 July 2020 and is currently the Lead Independent Non-Executive Director.

Mr Noko has an HND in Mechanical Engineering, an MDP and an MBA, and is the lead advisor at his consultancy company, ESG Advisory Limited. He was Executive Vice President at AngloGold Ashanti and has served as CEO of Air Chefs and Managing Director and CEO of De Beers Consolidated Mines Limited. He served on the Boards of several prominent companies, is a Chartered Director, a member of the Institute of Directors and is Chairman of the Council of the University of the Free State.

Tongaat is a major regional sugar producer with operations in Zimbabwe, Botswana, Mozambique and South Africa. With over 26,000 employees, Tongaat also provides a livelihood to more than 20,000 cane growers. The priority of the board during this transition period remains on steering the company with the support of shareholders and lenders to provide a sustainable future for all its stakeholders.

Tongaat Hulett CEO Gavin Hudson said: “On behalf of the board and executive team of Tongaat Hulett, we wish to sincerely thank Mr von Zeuner for his exceptional leadership, guidance and support during the difficult time that THL faced when he took over the role as Chairman. We wish him every success in his future endeavours. In welcoming Mr Noko as the interim Chairman, we take comfort that our efforts to complete the turnaround and recapitalisation will benefit from an exceptional depth of management expertise on the Board. We remain committed to the recapitalisation process, which we believe will protect intrinsic shareholder value and create a legacy for the half a million people dependent on the existence of Tongaat Hulett across the Southern Africa Development Community. Our engagement with lenders, shareholders and regulators to bring this to fruition continues.”

INVESTING IN THE FUTURE OF THE SA SUGAR INDUSTRY THROUGH SKILLS DEVELOPMENT

The challenges facing the SA sugar industry have received significant coverage over the past few years. Over 1 million South African’s are however reliant on the SA sugar industry along its value chain and Tongaat Hulett is committed to helping secure its long term success.

In the 2021/22 season the milling operations were negatively impacted by the numerous breakdowns at all three raw sugar mills due to a COVID-impacted maintenance shut before the start of the season, the unrest in KwaZulu-Natal during July 2021 and the challenges experienced in processing sugarcane that had been subject to the unrest-related arson.

 

Tongaat Hulett has taken decisive steps to address these challenges, with its annual maintenance shutdown proceeding well. The focus was on addressing all the major issues that affected milling performance from a miller’s point of view.

This offcrop included a great focus on planning and extensive oversight on the execution of the maintenance work. Another key focus in securing the future of Tongaat Hulett is in ensuring that its employees have the right skills and capacity to ensure that the milling season is successful.

This focus on training and development spans across the various levels of the organisation. Some of the programs include Engineer in Training (EIT), operator training and Supervisory, Management and Leadership development though Tongaat Hulett’s accredited Management Development and Supervisory Development Programs.

Earlier this year Tongaat Hulett Sugar SA rolled out refresher training for all Sugar Milling Operators in Process and Boilers. The seven day Sugar Process Refresher Training took place at each of Tongaat’s three SA mills, training approximately 270 Operators in preparation for the upcoming milling season.

As part of Tongaat’s focus on continuous improvement, this training aimed to upskill all Operators to improve production efficiency and performance and was facilitated by subject matter experts.

In addition to Operator specific training, the program included information on the sugar industry, global sugar trends, the sugar production process and insights on the supply chain. In addition, the process provided an opportunity for Operator feedback on key challenges and areas for improvement.

MD of Tongaat Hulett Sugar SA, Dave Howells said, “Investing in our people is essential for us to have a successful business and a sustainable future. We look forward to working together with our teams at each site and our supplying growers to ensure a successful upcoming season.”

PROGRESS IN CRIMINAL CASE AGAINST FORMER TONGAAT EXECUTIVES AND FORMER DELOITTE AUDIT PARTNER IN RELATION TO FRAUD CHARGES

Tongaat Hulett has been informed by the National Prosecuting Authority (NPA) that seven individuals, including six former company executives, appeared in the Durban commercial crime court on Thursday 10 February in relation to fraud charges. The seventh individual, Gavin Kruger, was the Deloitte audit partner on the Tongaat Hulett audit and at all times employed by Deloitte. All those charged were granted bail.

Late in 2019, Tongaat laid criminal charges against former executives identified for their role in undesirable accounting practices as a result of the PwC forensic investigations. The charges stem from alleged fraudulent activity which took place between March 2015 and September 2018, which saw the suspects cooperate to backdate land sale agreements. The backdated sale agreements had a significant impact on the Company’s financial results.

The PwC forensic investigations identified that certain senior executives initiated or participated in undesirable accounting practices which resulted in the company’s profits being overstated over a number of years. This led to the loss of value to our shareholders and many of our other stakeholders.

Additionally, civil proceedings brought by the company against four former executives during 2020 are also underway, and Tongaat Hulett will update on developments in this regard when appropriate. 

The former Tongaat Executives who appeared were Peter Staude, Murray Munro, Michael Deighton, Rory Wilkinson, Kamlasagrie Singh and Samantha Shukla. 

Tongaat Hulett Company Secretary, Johann van Rooyen said: “Tongaat Hulett welcomes this development in the legal process and it will continue to cooperate with law enforcement authorities whenever required to ensure that those responsible for the historic mismanagement of Tongaat Hulett are held accountable.”

The case was postponed to April 11, when it is expected to resume in the high court.

Further information:

NPA statement: https://twitter.com/NPA_Prosecutes/status/1491727913120632838

PwC investigation: https://www.tongaat.com/key-findings-of-pwc-investigation/

Key findings of the PwC investigation: https://www.tongaat.com/wp-content/uploads/2019/11/Key-findings-of-PwC-Investigations-29-Nov-2019.pdf

Civil cases again former Tongaat executives: https://www.tongaat.com/tongaat-hulett-seeks-r450-million-in-civil-claims-against-former-executives/