Liquidators sell for R4m
AGAVE DISTILLERS – the unlisted tequila maker based in Graaff-Reinet – has been bought out of liquidation for just R4m by former executive and former majority shareholder Keith McLachlan. Ironically, it was McLachlan, a former Dimension Data executive, who originally bought the business – then known as Reinet Distillers – out of liquidation in the late Nineties. Agave aimed to produce “spirit of the agave” on a commercial basis from the “garingbome” scattered around Graaff-Reinet.
Roughly four years ago, Agave started raising capital from the public, claiming it needed R12m to capitalise on a lucrative export market for the Karoobased tequila spirit. While there was much hype about major contracts for South Africa’s tequila, Agave never really got off the ground or showed evidence of genuine viability.
Finweek calculated the group’s collective turnover between 2000 and end-2005 to be just R10m, which left the company with substantial accumulated losses. However, Agave’s share placement memorandum pencilled in turnover of R19m and bottom line profits of R6m for the year ended February 2006 on the back of major export deals in the United States and Canada.
A lack of financial information from Agave gave rise to suspicions (as documented in Finweek and on Fin24.com) that all was not well with the much mooted export business. Shareholders became disillusioned, so much so that in late 2006 McLachlan was booted off the Agave board and his shareholding bought by a partnership headed by the late Jan Terblanche (former CEO of venture capital fund-raising specialists Capital Commitments).
Under the new regime Agave continued to lurch along unconvincingly and was placed into liquidation shortly after Terblanche committed suicide in early 2008.
Joint liquidator Bryan Shaw, of Progressive Administration, confirms a trust linked to McLachlan successfully bid R4m for the company. “We were initially hoping to get R7m to R10m for Agave. We had an offer for R9m, but that buyer couldn’t come up with the funding.”
Shaw notes that McLachlan is also the biggest creditor at Agave, with an outstanding loan account of R23m. We understand another significant creditor is Pooven Moodley, a former director of Agave, who is claiming a R4,5m bond.
The bigger picture, of course, is that McLachlan’s successful R4m bid for Agave puts earlier efforts by unlisted share peddlers – including Capital Commitments – to place stock with public investors into stark perspective. When Agave offered shares for cash at 100c/share in late 2005/early 2006 it carried an inferred valuation of R64m. Shareholders who participated in the fund-raising efforts three years ago can safely write off their investments in Agave.
If McLachlan hopes to attract public funding to revive Agave it might be advisable to pitch shares at levels that more realistically reflect the risks of a small liquor producer. After all, a business that’s gone belly-up twice surely can’t demand much of a premium on its shares?