Tongaat Hulett, a South African sugar producer, announced last Wednesday that Mauritius-based investment group Magister will underwrite half of its R4 billion ($258 million) rights offer, potentially giving the unlisted business a controlling share in the company.
After the firm announced the planned cash call to help it manage its debt, shares in the company, which is one of South Africa’s largest sugar producers, fell by 28%.
Magister Investments would underwrite half of the proposed rights offering, or R2 billion, according to Tongaat.
“Magister Investments is a private, limited company incorporated in the Republic of Mauritius, wholly owned by Mauritius International Trust Company Limited, as trustee of the Casa Trust (a Mauritius-registered trust). Hamish Rudland is the settlor of the Casa Trust and the beneficiaries of the Casa Trust are Rudland, his wife, Bridgette Rudland, and their three children (all of whom are under 18 years old). Rudland is director of Agriterra,” according to Land Matrix.
“We have agreed that they [Magister] get a board seat for every 20% of shares that they own, with a maximum cap of 60%,” Gavin Hudson, CEO of Tongaat Hulett told Reuters.
Magister’s holding might reach about 60% if minority shareholders do not subscribe to the remaining rights offering, according to chief financial officer Rob Aitken.
Magister’s holding will be somewhere in the “mid-range” if minority subscribe, he added. Following the revelation that it had inflated its sales, earnings and assets in prior years, the company’s market value has dropped about 90% in the last two years. It was compelled to hire new management, who took steps to clean up the company’s accounts and reduce debt.
While CEO Hudson stated that the rights offer, if successful, would reduce the company’s debt to a more “sustainable level”, experts said market participants dropped the shares because they expected a R2 billion rights offer.