Top ED Ally Takes Over Sugar Producer Tongaat Hulett
19 January 2022
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A takeover of one of Southern Africa’s biggest sugar producers by a wealthy Zimbabwean family was never going to be sweet news for everyone in South Africa’s financial markets.

But, according to Hamish Rudland, who has just won a shareholder vote that will give him control of Tongaat Hulett, a Zimbabwean owning Tongaat is not a handicap. It is just what the troubled company needs.

The bulk of the company’s output is from Zimbabwe – at Hippo Valley and Triangle – and Zimbabwean shareholders know the lay of the land more than anyone, he says.  

“With Tongaat’s largest operating business being in Zimbabwe, our local knowledge of the landscape and operating environment will be of significant benefit to Tongaat,” Rudland said ahead of the vote, in a response to questions over his intentions.

At an EGM on Tuesday, Tongaat shareholders approved the proposal by Magister, an entity led by Rudland, to underwrite a R4 billion rights offer for the company. Tongaat is desperate for fresh capital to erase a debt bill that was as high as R11 billion and to start fixing the damage from an accounting scandal.

Many side-eyed the deal. One headline said: “Zimbabwe tobacco barons’ planned capture of Tongaat Hulett”. It was capture, to the critics, and not a standard rights issue.

Before the vote, some minority shareholders opposed the deal. When minorities fail to pay for more shares in a rights issue, the underwriter, in this case Magister, gets more shares. Shareholders that don’t subscribe for more shares get less stock.

The problem is, the Rudlands knew that those shareholders – who would have had to pay for up to seven times the value of their shares – had little choice, given the state of Tongaat’s books. The rights issue is the last resort.

Selling assets and tightening spending failed to clear the debt. Magister saw an opportunity to take over Tongaat by underwriting a capital raise. Tongaat’s market capitalisation is around R740 million, compared to remaining South African debts above R6.5 billion.

Still, the Rudlands’ proposal did not exactly meet with cheers from minorities and the business press in South Africa. Rudland has been linked to ZANU PF and has had to face accusations that he is trying to clean dirty money from cigarettes.

This allegation relates to Hamish’s brother, Simon. He has been in the cigarette business since 2005, and his Gold Leaf Tobacco Corporation has previously been accused of flooding South Africa with cheap cigarettes. The controversy heightened when Simon survived an assassination attempt in Johannesburg, 2019. A City Press report had claimed that about 26.8% of all cigarettes sold in South Africa were “illicit” and that this trade was dominated by his Gold Leaf Tobacco.

Hamish insists Magister has nothing to do with his brothers’ business.