South Africa's Tongaat to sell starch business to Barloworld
The group is selling assets to reduce debt, promising jobs will be retained.
Tongaat Hulett, South Africa’s heavily indebted sugar producer, said on Friday it would sell its starch business to Barloworld for R5.35 billion, including debt.
The company, which recently reported a headline loss of R314 million for the six months to end-September, will use the proceeds from the sale to repay a portion of its debt, which it aims to cut by R8.1 billion by March next year.
The former blue-chip company also intends to ask shareholders for about R4 billion in a rights offer.
“Our agreement is to reduce debt by R8.1 billion by March 2021 and we have already met and exceeded the first debt repayment milestone agreed with our lenders,” said Tongaat CEO Gavin Hudson.
The group said in a statement on Friday that jobs at the starch business would be retained, and the move would not affect employees’ conditions of service.
Tongaat said the starch business was one of the largest wet millers in Sub-Saharan Africa, operating four wet-milling plants at Germiston, Kliprivier and Meyerton, Gauteng; and Bellville, Western Province. The mills had a combined total installed capacity to process more than 850,000 tonnes of maize a year, the company said.
Separately, Barloworld, a dealer for Caterpillar and other industrial equipment makers, said the starch business was highly cash generative, relatively asset light and a defensive investment.
Tongaat said earlier this month that it was in talks to sell the unit, Tongaat Hulett Starch, which, according to its website, is Africa’s largest producer of starch, glucose and related products.