Terris Consortium, fronted by Mpumalanga businessman Robert Gumede, may have swayed Tongaat Hulett’s business rescue practitioners to emerge as the preferred bidder for the troubled South African agro-processing firm’s assets on account of financial backing from the Public Investment Corporation (PIC) under questionable circumstances.
Business rescue practitioners in Tongaat Hulett, with a net debt of R7.6 billion and currently under business rescue, has over the past months confirmed Kagera, a Tanzanian outfit, as the preferred bidder.
It also emerged this month that RGS, a Mozambican outfit, had also been enlisted as a second preferred bidder.
Now, Gumede’s Terris Consortium, which has previously complained that Kagera had been wrongly picked as preferred bidder, has bounced back as a third preferred front runner to bag the assets of the troubled company. Terris Consortium was reported in local media over the weekend as having won control of Tongaat,
After investigations, “Business Report” can report now that that Gumede’s consortium found itself as the preferred bidder on the strength of a deal to secure financial support from the PIC.
Gumede and his consortium will reportedly buy out the almost R8bn that the debt-laden Tongaat owes.
Tongaat owes some nine banks more than R6.5bn. The company, which published its much-delayed financials, reported last week that it made a loss of R1bn in 2022.
“The PIC is trying to process Gumede’s loan request so he can purchase the debt from the banks… they are pushing it (loan) and are looking to approve a deal by the 14 of November that he can have a claim on the debt before the vote later in the month,” said a source with knowledge of the developments.
He added: “He has signed exclusivity with the banks to buy their debt.”
RGS was offering as much as R6bn for its bid, while Kagera had tabled a bid of just over R3bn. The Zimbabwean government has also explained that it had tendered for the Tongaat assets, with the initial losers to the tender complaining of unprocedural and underhand dealings in the picking of Kagera.
Mpumelelo Maseko, an executive with the PIC, said by phone that the funder would provide financial support for the winning bidder in Tongaat Hulett.
“We have said we are supporting anybody that has put in a bid, but the decision on who is successful in the bidding process is not going to be made by us. Whoever is going to be announced as the preferred bidder that’s who we are going to support,” Maseko told “Business Report”.
The banks owed by Tongaat may have been swayed by assurances by Gumede and his consortium that they will be able to speedily raise the funds required to settle what they are owed.
It was agreed, sources said, that the PIC will secure an “unconditional approval by the 14th” and finalise all the “legal documentation (by) the 24th so money can flow” by the time the vote for the business rescue plan is held.
On October 31, Tongaat confirmed that creditors in the company had “voted in favour of an extension of the publication dates of the companies’ respective amended business rescue plans” to no later than November 24, 2023.
“It is important to note that an extension of the publication of the amended business rescue plans does not impact the current work streams or the length and cost of the business rescue process. These extensions will provide additional time for the conclusion of the relevant transaction(s) and for the incorporation of such transaction information in the plans,” Tongaat said in a statement.
However, questions have emerged that the PIC may have cut corners in approving a deal that normally takes half a year, including due diligence procedures. Other sources said the PIC was seeing an opportunity to be key investors in Tongaat by providing the funding.
The business rescue practitioners in Tongaat have also been singled out for lacking transparency after allegedly secretly reopening the bidding process despite announcing Kagera as preferred bidder.
Gumede has previously complained that Kagera was unprocedurally picked as the preferred bidder, with “Business Report” reporting in August that the South African Industrial Development Corporation (IDC) had gone to bed with Tongaat to pick Kagera ahead of other bidders.
Moreover, sources said, Kagera appeared not to have the money and may have been banking on funds from the IDC, which also provided funding for Tongaat to sustain operations.
In a letter to the IDC on August 9, Terris complained that while it had received communication from Tongaat business rescue practitioner advisers that any IDC funding support for a bid for Tongaat was precluded, it was shocking to learn that as much as 80% of funding for Kagera had been secured from the IDC.
BUSINESS REPORT