Mozambican bidder pulls out of race after accusing Tongaat Hulett BRPs of ‘bias’
Mozambican group RGS has pulled out of the race to acquire sugar group Tongaat Hulett.
In a terse letter announcing the decision, the group accused the business rescue practitioners (BRPs) of being “patently biased in favour” of the proposal from rival bidder Vision Group.
RGS had offered about R8bn to rescue the ailing sugar business.
In the letter sent to the BRPs on Tuesday, RGS said it had previously written to them to express “serious concerns” about the manner in which the BRPs — Peter van den Steen, Trevor Murgatroyd and Gerhard Albertyn of Metis Strategic Advisors — had been conducting the process.
It alleged they had not conducted themselves appropriately in accordance with their duties and obligations as BRPs nor in the interests of Tongaat and its stakeholders.
“The BRPs have consistently taken steps to place impediments in the way of RGS’ proposals and have been patently biased” in favour of Vision group, it claimed.
“The board simply does not trust the BRPs are honest, independent professionals in this process, as they should be, and believes the BRPs will continue to work against RGS even if the RGS business rescue plan were to be adopted,” it said.
Tongaat Hulett was placed in business rescue in October 2022 after its funders pulled the plug when it emerged key former executives had allegedly manipulated accounts for years.
The company, which operates in Zimbabwe, Mozambique, and Botswana, owes banks about R8bn.
About 25,000 people, mostly in KwaZulu-Natal, rely on Tongaat for their livelihoods.
RGS pointed to events of the past week where it alleges the rescue practitioners took steps to assist the Vision Group to address defects in its business rescue plan for Tongaat, and further alleged the BRPs “made use of information confidential in the RGS proposal for this purpose (and) have only reinforced the board’s view that the BRPs are not independent and are hostile to RGS”.
It said the board “cannot justify the risk of paying R2bn” to the lender group before closing the transaction. The lender group comprises a number of banks and financial institutions owed by Tongaat.
In a normal course, mergers and acquisition transaction payments would only occur at or shortly after the closing of a transaction, RGS said.
“This is the only basis on which the board would be willing to proceed but we understand this will not be acceptable to the lender group, who require upfront payments to be made to them.”
Given the risks, RGS said it was the board’s view that Vision Parties would most likely be challenging the outcome of the vote at the meeting where its plan to rescue Tongaat is to be adopted.
It said in light of the BRPs working to assist Vision Parties in such a challenge and/or to delay the implementation of the RGS plan, the company’s board was not able to authorise paying the consideration for the acquisition of Tongaat Hulett until the closing date of the transaction occurs.
RGS said the decision to withdraw was not taken lightly, especially as it strongly believes its plan is the most advantageous plan for Tongaat and all its stakeholders, and offers a fair price for the business.
RGS said had the process been “run fairly and independently and in the interests” of Tongaat and its stakeholders, its plan would be the only one of the two plans up for consideration.
Vision investors include: ● Businessman Robert Gumede;
● Remoggo, a Mauritian-based investment holding company with investments in fast-moving consumer goods, agribusiness, logistics and facilities management services in Zimbabwe and seven other African countries;
● Terris, whose most recent realised investment was Samancor Chrome; and
● Almoiz Group, one of the largest agribusiness groups in Pakistan, with substantial interests in the sugar, energy, steel, animal feed, textiles, and food and beverages sectors.
Meanwhile, the BRPs responded, saying they “strongly refuted the baseless allegations made in the letter that was directed at them”.
“These allegations will be dealt with at the appropriate time,” they said.