THE COMPETITION Commission yesterday approved, with some lengthy conditions, Magister Investments’ possible acquisition of Tongaat Hulett (THL) following its partial underwriting of a THL rights offer.
Tongaat’s shareholders recently voted to implement a rights issue of between R2 billion and R4bn, which would be partially underwritten by up to R2bn by Mauritius-based Magister Investments, a privately-held group controlled by Zimbabwe’s Rudland family.
Depending on how the shareholders take up the rights issue, Magister might be left with more than 50 percent of THL’s shares.
THL spokesperson Virginia Horseley said they welcomed the decision of the Competition Commission and the group was aligned with the commission on the requirements.
“We will continue to progress the outstanding conditions precedent, including approvals from the South African lenders and the relevant merger control approvals in various jurisdictions to deliver a successful rights offer,” she said.
Magister is led by Hamish Rudland, brother of tobacco businessperson Simon Rudland, who is a shareholder of Gold Leaf Tobacco.
Although most shareholders voted for the rights issue, a number of shareholders were disgruntled with the process, the dilutive nature of the rights issue and that Magister might end up with control of Tongaat.
The commission said yesterday the proposed transaction was unlikely to result in a substantial prevention or lessening of competition in any relevant markets.
However, it was concerned about the likely impact on employment, the promotion of a greater spread of ownership, as well as the effect within the sugar value chain, and the region in which THL is active.
The commission said the Food and Allied Workers’ Union and the Department of Trade and Industry and Competition had also raised concern about possible job losses through the proposed deal and to remedy this, the parties would not be allowed to retrench any employees as a result of the merger.
THL would be required to inform the commission of their intention to embark on any retrenchments, for three years post the proposed merger.
THL would be required to maintain the pre-merger head count for at least one year after the proposed transaction.
The commission said to mitigate against the effects on shareholdings by historically disadvantaged persons (HDPs), an employment share ownership plan would need to be established that would hold 5 percent in the South African operating subsidiary of THL, within three years of the deal implementation.
Also, within three years, THL had to maintain its BEE status at the same levels as when the proposed deal took place.
The commission said it was also concerned about the effect of the proposed transaction within the region where THL operates – THL sources almost half of its feedstock from a substantial number of black farmers and co-operative members.
The commission said THL would need to ensure that it continued to source at least 40 percent of its feedstock from HDP’s, and that the THL would continue to participate in the Sugar Master Plan.
The commission said also that at least 20 percent of the land holdings would have to be sold to HDPs, if THL sold any land post the merger, subject to, among others, market-related commercial terms being agreed.
In addition, the capital expenditure commitments contained in THL’s turnaround strategy would have to be maintained.
Magister holds interests in various sectors, including agriculture, transport and logistics, civil construction, and real estate.
Its investments span across various jurisdictions including Guernsey, Mauritius, South Africa and Zimbabwe. Magister also holds a minority shareholding of 0.15 percent in THL.
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