Tongaat Hulett strikes deal with Bokomo Namibia
Sugar producer Tongaat Hulett [JSE:TON] said in a statement released on the JSE Stock Exchange News Service on Tuesday afternoon that it would be disposing of its interest in its Namibian business in a bid to tackle debt.
Tongaat Hulett owns an effective 51% beneficial interest in Tongaat Hulett Namibia (THN). The entire sugar packaging and distribution business would be sold to Bokomo Namibia for R220m. The deal is still subject to certain conditions.
Tongaat Hulett's share of the proceeds - or R112.2m before deductions for taxes and transaction costs - would be used to reduce its debt levels, the statement said.
It has been a challenging year for Tongaat Hulett. In June, the 127-year old company - and biggest sugar producer in SA - had its listing suspended on the Johannesburg Stock Exchange and in London. The board requested that its listings be suspended amid a forensic probe, after the company announced that its financial results for the year to March 2018 would have to be restated.
In October, auditing firm PricewaterhouseCoopers completed and submitted its forensic report into suspect activities at Tongaat Hulett.
In Tuesday's SENS statement, Tongaat Hulett said as part of its strategic review, the board of directors had approved the disposal of THN.
The net asset value attributable to the Namibian business as at March 2019 was R37m, while its profit after tax for the year ended March 2019 came to R30.1m and attributable earnings were R15.3m. This financial information had not been reviewed by external auditors, the statement noted.
"Notwithstanding that THN is a strong and well-established business in Namibia, the board has considered it as non-core and is of the view that its disposal would allow the Namibian business to grow into new areas while facilitating Tongaat Hulett's access to the market via long term sugar and related products supply agreements concluded with Bokomo," Tongaat Hulett said.
The statement added that the purchase price for THN would be payable in cash on closing, subject to a post-closing adjustment relating to any variation from the agreed normalised working capital level of R25m.
The proposed deal is still subject to approval by the Namibian Competition Commission, the sale of the business and the completion of a due diligence investigation THN by Bokomo before 30 November 2019.
Tongaat Hulett added that the due diligence investigation is largely complete and the process for filing with the Namibian Competition Commission is underway.