Bonface Orucho, bird story agency

An African sugar multinational is one of a number of companies vying to take over operations of South Africa’s Tongaat Hulett Sugar in an acquisition deal that would highlight the potential for shared collaborations among African corporations to achieve business success.

“We identified Kagera Sugar as the preferred candidate... The group is financially sound, with a solid track record,” stated the Tongaat Hulett company's business rescuers on the company website in July.

Kagera Sugar is a subsidiary of Super Group, a Tanzanian conglomerate controlled by Tanzanian businessman Seif Ali Seif and his family. The company operates subsidiaries in the Democratic Republic of the Congo, Bahrain and Oman.

"We started the process with a list of more than 70 interested parties, which was narrowed down to eight that focused on acquiring the combined Tongaat Sugar Assets," the website explained.

Tongaat Hulett Sugar, at over 130 years old, stands as one of South Africa's oldest and largest sugar producers, accounting for approximately 25% of the country's sugar production—approximately 600,000 metric tons annually, as per the company's website.

Once listed on the Johannesburg Stock Exchange (JSE), Tongaat Hulett has been under a voluntary business rescue process led by business rescue practitioners since October 2022, after it accrued a debt exceeding US$400 million (R7.4 billion).

An announcement made in July 2023 by the business rescue practictioner named Kagera Sugar as the selected company. The Tanzanian-based firm was to acquire “the complete sugar division of Tongaat Hulett Limited (THL) in South Africa and the investments in Zimbabwe, Mozambique and Botswana (Tongaat Sugar Assets).”

However, in a November notice to stakeholders, rescuers announced that the yet-to-be-finalized deal awaited the presentation of proposed plans for the company to stakeholders by December 29, 2023, before a voting session to approve these plans takes place before December 8, 2023.

Tanzanian finance expert John Minango highlighted the significance of a potential deal with Kagera in The Tanzania Digest, citing it as an example of potent mergers and acquisitions that can reshape industries.

“A partnership like this could create a powerful conglomerate in the sugar industry, consolidating resources and expertise for improved efficiency and innovation,” Minango noted in an expert opinion article.

A failure to implement a deal could lead to the possible dissolution of Tongaat Sugar, with economic consequences for a number of countries, considering the company holds a significant presence in key African markets, including Mozambique, Zimbabwe, Botswana, and KwaZulu-Natal.

In Mozambique, Tongaat Hulett’s factories contribute about 60% of the country’s sugar production, as reported by 360mozambique.com. In fact, across these markets, the company estimates employing close to 30,000 people directly.

With operations in the Democratic Republic of Congo and the Middle East, Kagera Sugar could leverage its experience to revitalize Tongaat’s success story.

This acquisition adds to the growing number of mergers and acquisitions across the continent. The 2023 Dealmakers Africa report indicates a substantial increase in M&A activity, with 687 local deals announced in 2022 valued at US $17.53 billion.

This, however, is not the first acquisition deal targeting sugar processors in Africa, with past deals showing commendable success. In 2020, for instance, The Dangote Sugar Refinery PLC (DSR) acquired Savannah Sugar Company Ltd. in a merger and acquisition process.

Nigeria's Business Day reported that the company recorded profits before tax (PBT) of US$31.6 million (N36.27 billion) for the nine months ended September 30, 2022, a rise of US$11.5 million (N13.17 billion) over 2021. Dangote Sugar recently announced merger plans with NASCON, a salt, seasoning and spice refining company and Dangote Rice.

An October 2023 KPMG survey shows the M&A market will grow over the next two years. 68% of respondents expected more activity in a market dominated by deals in South Africa and Nigeria. Deals in agriculture are expected to constitute 4% of future deals, according to the survey.

However, recent reports show Kagera Sugar is facing stiff competition from other bidders. According to the African Farming website, other bidders in the acquisition of Tongaat Hulett include the Terris Consortium, a group of businesspeople drawn from South Africa, Zimbabwe and Pakistan, among other interested parties.

However, as Minango emphasizes, the success of mergers and acquisitions hinges on effective governance and transparency throughout the process.

“For this partnership to yield its full potential, it is crucial that all stakeholders, including the government, ensure the deal is conducted with the highest standards of integrity and compliance,” Minango explained.

bird story agency

Useful Link: https://www.tongaat.com/tongaat-hulett-limited-business-rescue-update-preferred-bidder-selected/