DURBAN – Tongaat Hulett is to sell Tambankulu Estates to Eswatini’s Public Service Pensions Fund for R375 million in a share purchase agreement, with the proceeds earmarked to reduce its R13 billion debt.
“Tongaat’s board has previously advised shareholders of its commitment to reduce the group’s debt to more sustainable levels and of the undertakings it has given to its funders to reduce debt levels by R8.1bn by March 2021,” the group on Wednesday.
It added that it had undertaken a debt reduction plan, which includes implementing greater operational efficiencies in order to improve the group’s cash flow, considered potential non-core and core asset disposals and considered potential equity capital raising initiatives.
In explaining the rationale for selling the business, Tongaat said although Tambankulu was a quality and well-run business, it was not fully integrated into the larger sugar business of the Tongaat group and accordingly has agreed to dispose of this business.
“This disposal reinforces Tongaat’s commitment to reduce debt levels and to reposition the group for long-term sustainability and value creation for Tongaat shareholders,” the group said.
The agriculture and agri-processing business said Tambankulu, which the group acquired in 1998, is an agri-business that consists of 3 767 hectares of fully irrigated land under sugar cane producing 62 000 tons of sucrose a year.
Tambankulu’s farms use high-tech irrigation systems, fertigation, artificial ripeners and herbicides, and it delivers its sugar cane to the nearby Simunye and Mhlume sugar mills. Tongaat expects the transaction to be concluded at the beginning of December, approved by an ordinary resolution of Tongaat shareholders.