Tongaat Hulett shareholders yesterday voted to proceed with a contentious R4 billion rights issue which it says will help secure the future of the group and its stakeholders, and protect the livelihood of millions of people in southern Africa.
Chairperson Louis von Zeuner also announced that a legal team had been appointed to proceed with claims against their former auditor, Deloitte.
This after restatements had to be made to financial statements in the years prior to 2019 of about R11bn, which the auditor had failed to pick up year after year.
Some R450 million of legal claims have already been instituted against key former directors.
Von Zeuner raised the matter at the meeting, because some shareholders had opposed the rights issue on the basis that a legal settlement against Deloitte might provide enough capital to restore the balance sheet to health, thereby avoiding the need for a rights issue.
Non-executive director Linda de Beer said at the meeting that the legal process against Deloitte was not a solution to the group’s short-term financial issues, as the claims were likely to take years to conclude.
She said while they had an idea how much they intended to claim from Deloitte, they did not wish to disclose this figure yet. However, it would not be the full amount of the financial restatements.
Chris Logan from Opportune Investments was among the shareholders who had suggested the meeting be postponed.
He said the fact that the Tongaat group had announced its plans to act against Deloitte at this late stage was an indication that shareholders had not been in a good position to make a decision on the rights issue.
Another analyst, David Woollam, said the rights issue was value destructive and highly dilutive for shareholders, and he said Von Zeuner’s words about a “collapse” in the KwaZulu-Natal property market had not been stated in the last results announcement.
Tongaat Hulett is South Africa’s biggest sugar producer, has a large property portfolio in KZN and is the largest private sector employer in Mozambique and Zimbabwe.
The group has lost more than 90 percent of its market value following its disclosures of accounting irregularities in 2019.
Responding to questions by some analysts about the probity of Magister, a regional commodity trader and investor in agriculture that has underwritten the rights issue by R2bn, Von Zeuner said the group and accounting firm PricewaterhouseCoopers had conducted the necessary due diligence on Magister.
In addition, said Von Zeuner, Magister had provided Tongaat with a Standard
Bank guarantee for the underwritten amount – this after the bank had conducted its own anti-money laundering and other checks on Magister’s governance.
Von Zeuner said the investment by Magister would help Tongaat access key growth opportunities in the region, while Magister also did not intend to delist the group.
Tongaat has reduced its debt from R11.35bn to R6.5bn since 2020 through asset sales, cutting costs and improving operations and restructuring.
But it no longer had the luxury of time to reduce this debt, said Von Zeuner.
He said punitive interest rates required urgent reductions in debt levels, and funding needed to be secured to settle a R2bn payment-in-kind debt instrument by March to meet commitments to lenders and avoid an increase in borrowing costs.
He said the board did not believe shareholders would benefit from a break-up of the group’s core assets, something that might have occurred had the resolution to hold the rights issue not succeeded.
Tongaat’s share price closed 3.47 percent lower at 5.29 on the JSE yesterday.
BUSINESS REPORT ONLINE