Liq­uida­tors sell for R4m

Finweek English Edition - - Openers - MARC HASEN­FUSS

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?

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