Gloves off in battle for sugar producer
Mozambican RGS Group says it is the only legitimate buyer of sugar producer Tongaat Hulett, because Robert Gumede’s Vision group has not put up the capital to buy the debt as initially planned.
The RGS business rescue plan is “undeniably the only valid business rescue plan in existence”, it said in court papers filed this week.
The gloves have come off between Gumede’s Vision group and RGS, a consumer goods and sugar firm, as both parties wish to be the preferred owner of the beleaguered sugar producer.
The battle for an owner is critical to KwaZulu-Natal’s rural economy and the livelihoods of many small-scale farmers who sell cane to Tongaat.
On Wednesday, the high court in Durban will hear applications from multiple stakeholders that wish to see the vote over who can buy Tongaat postponed to between January 8 and 11 and those who want the vote to go ahead as planned on Thursday.
It appears the business rescue practitioner, Metis Strategic Advisors, also wants the vote postponed until January to allow for the publishing of new details on how the two bidders will pay for the business.
In its court papers, RGS Group has asked the high court to ensure the vote to buy the business takes place on Thursday as planned. It has argued that it can take over the company immediately and is able to pay for Tongaat and settle its outstanding sugar levies.
It also claims that the rival Vision group has not secured an agreement with lenders.
However, Vision told the media in November it had a deal with the nine banks to buy their claims worth between R7.7bn and R7.9bn, which would give it the majority vote over who could buy Tongaat, effectively making it the owner.
Vision then entered a second series of talks with bankers after the first failed to come to an agreement.
RGS-Group said it met 28 representatives from nine banks on December 7 and found out that Gumede’s group had not raised the money and the legal agreement with the banks had lapsed.
“This fact marks the second time that the Vision parties have failed to secure the funding necessary to purchase the lenders group claims.”
This means Gumede does not have the majority vote, but he can still have his proposal voted on and can still win the business. His ownership is, however, less certain than previously claimed. The Vision business rescue plan is premised on buying the lenders’ claims, which has not happened and thus the plan is invalid and cannot be adopted, RGS said.
‘UNLAWFUL’
It also pointed out that the Companies Act does not allow for new plans to be reprinted — as is likely to happen — and claims this would be unlawful.
RGS also accuses the business rescue practitioners of wanting to postpone the vote to allow Vision to redo its plan.
The business rescue practitioners’ conduct, says RGS, gives an impression they are managing the “rescue solely for the benefit of the Vision parties and the lender group. A certain level of obedience to the lender group’s interests might be justified on pragmatic grounds”.
Vision has disputed RGS’s claims and insists it has the cash to buy Tongaat.
Vision’s spokesperson, Rob Bessinger, said “contrary to the allegations of RGS, the Vision plan is in fact funded and ripe for adoption. It is not subject to the [Public Investment Corporation] funding and is therefore ready for implementation.”
He admitted that the company has amended its plan.
“The amended Vision plan has been submitted to the business rescue practitioners for presentation at the creditors’ meeting scheduled for Thursday December 14 and we await the outcome of that meeting.
“Our Vision plan is not subject to ‘wild promises’ but is based on real equity as well as a plan that will benefit all stakeholders and, importantly, secure all the livelihoods of those dependent on a successful rescue of the Tongaat group.”
The court will on Wednesday decide when the vote for the new owners can take place.
Tongaat has been in business rescue since October 2022.
THE BATTLE FOR AN OWNER IS CRITICAL TO KZN’S RURAL ECONOMY AND THE LIVELIHOODS OF MANY SMALL-SCALE FARMERS