Shares in debt-laden Tongaat Hulett surged 17.78% on Tuesday following an announcement that Artemis Investments, which is controlled by shareholder activists, had increased its shareholding in the JSE-listed sugar producer and property company to 10%.
Artemis has backed a group of minority investors disgruntled with the timing and size of Tongaat’s now abandoned R5 billion rights offer.
Tongaat closed at R4.77 a share, 76 cents higher than its previous closing. The stock is also more than 55% up in the past week, following the group’s decision to can the controversial capital raise.
Charles Liasides, a director of Artemis Investments, told Moneyweb on Tuesday the group previously held about an 8.5% shareholding in Tongaat, but “with recent developments it made financial sense to increase it to over 10%”.
Liasides said Artemis had increased its shareholding in Tongaat to over 10% in about the past two weeks.
He described Artemis Investments as a private investment company owned by a family trust that has joined forces with other shareholders to prevent the effective takeover of Tongaat.
Liasides declined to comment on the quantum of investment made in Tongaat shares, other than to state: “The quantum is relatively small in the bigger scheme of things.”
He confirmed that the rationale for Artemis increasing its shareholding in Tongaat to 10% was to get a voice and to enable it to engage Tongaat’s management.
“We have had ongoing engagements with Tongaat Hulett throughout this period and obviously have been directly involved with the TRP [Takeover Regulation Panel] appeal process,” he said.
The “recent developments” and TRP appeal process referred to by Liasides relate to Tongaat’s planned recapitalisation to reduce its massive debt being scuppered by a Takeover Special Committee (TSC) decision withdrawing the mandatory offer exemption previously granted by the TRP to the company.
The TSC withdrew the exemption because of disclosures about certain third party share acquisitions. It concluded that the third parties and Magister Investments, the underwriter of the proposed rights offer up to a maximum of R2 billion, are concert parties and consequently declared the shareholder waiver a nullity.
Mauritian-based Magister Investments is a privately-held group controlled by Zimbabwe’s Rudland family.
Magister is led by Hamish Rudland, brother of controversial tobacco tycoon Simon Rudland, who is a shareholder of Gold Leaf Tobacco.
Artemis Investments was part of the consortium that submitted the application to review the TRP mandatory offer waiver/exemption granted to Tongaat Hulett.
Asked what Artemis would like Tongaat to do to reduce its debt burden and place the company on a more sustainable footing, Liasides said they believe serious consideration should be given to the offer on the table for the Mozambique assets “and of course pursue the Deloitte claim”.
This is a reference to reports last month that US-based Lusitania Investment Capital had made an offer of about $220 million (around R3.74 billion) for Tongaat’s sugar operations in Mozambique.
However, Tongaat was reportedly unable to enter into negotiations because of the rights offer process.
Analyst and shareholder activist David Woollam said last month that Tongaat had not denied the offer for its Mozambique operation and, from the price mentioned, Tongaat would be realising full value for an operation that does not make much profit.
Tongaat on 24 June announced the termination of its rights offer underwriting agreement with Magister and the establishment of a restructuring committee.
Non-executive director Piers Marsden was appointed chief restructuring officer to intensify focus on the turnaround of the company due to the delay in implementing the rights offer.
Tongaat said the primary responsibility of Marsden and the restructuring committee will be to further focus on developing solutions to reduce and repay debt to sustainable levels while improving the liquidity of the company.
Liasides’s reference to the Deloitte claim relates to a claim against auditors Deloitte reportedly worth more than R1 billion.
Tongaat reported in February that six former company executives – Peter Staude, Murray Munro, Michael Deighton, Rory Wilkinson, Kamlasagrie Singh and Samantha Shukla – together with Deloitte audit partner on the Tongaat Hulett audit Gavin Kruger, had appeared in the Durban commercial crime court in relation to fraud charges and were all granted bail.
The charges stemmed from alleged fraudulent activity between March 2015 and September 2018 related to the alleged backdating of land sale agreements, which had a significant impact on the company’s financial results and led to a significant loss in shareholder value.