Tongaat Hulett believes Barloworld's KLL Group is making a premature call on MAC notice
Tongaat's Gavin Hudson has been issued with a material adverse change notice on the sale of its starch business.
On Thursday 15 May, Barloworld said that its subsidiary KLL Group had issued a material adverse change (MAC) notice to Tongaat Hulett.
This comes after the sugar producer had agreed to sell its starch business to KLL Group for R5.35 billion in February, in an effort to reduce its debt.
In the statement, Barloworld said that it is of the view that the Covid-19 global pandemic and its consequences constitute an event that is reasonably likely to cause the EBITDA of the sale business for the financial year to end 31 March 2021 to be 82.5 percent or less than it was in 2020. For this reason, an MAC has occurred.
However, Tongaat CEO Gavin Hudson has said that the group was surprised at the notification. “We believe that Barloworld does not have sufficient information at its disposal to come to such a conclusion, given that we are only one month into our trading year. We do not believe that an MAC has occurred.”
Gavin said that Tongaat understood the impact that the Covid-19 pandemic and subsequent lockdown has had on most businesses, but that the sugar producer has taken this into account in its modelling. “We have stress-tested various scenarios and are confident that at this point there is no MAC event. As such, we believe it is premature to make such a call.”
He added that Tongaat remained willing to work with Barloworld in a collaborative way to ensure the company had a better understanding of its starch business.