Vision Group to Acquire Tongaat Hulett's Mozambique Operations Amid Business Rescue Efforts

In a significant development for the regional sugar industry, Vision Group has entered into an agreement to purchase the Mozambique operations of South Africa's troubled sugar producer, Tongaat Hulett. This move comes as Tongaat prepares for a potential delisting and shutdown, signaling a key shift in the company’s strategic direction.

The acquisition details, finalized on Monday, entail Vision Group taking over Tongaat's $8.5 billion (R8.5bn) debt from lenders. Most of this debt will be converted into equity, as per the terms agreed upon. The critical assets involved are held within three entities, with Vision set to acquire all of Tongaat’s shares in these, including an 85% stake in Tongaat Hulett Açucareira de Mozambique SA. The government of Mozambique will retain the remaining 15%.

The deal’s closure is contingent on several suspensive conditions typical of such large-scale transactions, mirroring the arrangements Tongaat had in Zimbabwe and Botswana. The sale price corresponds to the entities' fair market value, to be determined by an independent valuer. This price will be adjusted against the claims of the lending group.

The transaction occurs in a broader context of Tongaat Hulett's business rescue phase, initiated following a PwC investigation that unveiled substantial accounting fraud within the company. This scandal led to inflated profit figures, massive writedowns, and an inability to meet debt obligations, culminating in creditors demanding repayment and pushing Tongaat into business rescue.

Vision Group’s acquisition strategy is bolstered by the recent appointment of Gavin Dalgleish, a seasoned industry leader and former Illovo Sugar CEO, who will take the helm as CEO in April. This strategic leadership choice aligns with the closing date for the asset transfer, marking a new chapter for the embattled sugar operations.

However, the deal has not been without contention. RGS, another Mozambican bidder, has initiated legal action against Vision, alleging that the business rescue practitioners involved did not fulfill their duties and did not act in the best interests of Tongaat and its stakeholders when selecting Vision as the winning bidder.

Despite these challenges, Vision and its consortium partners, including notable firms like Terris, Remoggo, Guma, and Pakistan-based Almoiz Industries, are committed to revitalizing Tongaat. Almoiz, in particular, brings valuable experience in modernizing agro-processing operations and expanding into new markets, which could be crucial for turning around Tongaat’s fortunes.

As the final agreements aim to solidify the Vision Group’s control over Tongaat Hulett's Mozambique assets, the industry watches closely to see how this transition will affect the broader sugar market in Southern Africa.