Tongaat Hulett is of the view that it continues to meet its obligations under the agreement reached with Barloworld in February this year on the sale of its Starch Business, and is optimistic that the opening up of business in the country will enable the sale to go ahead as planned.
This comes after Barloworld indicated it believes a material adverse change (MAC) has occurred due to the impacts of COVID-19, with relation to the sale of the starch business to Barloworld.
Tongaat CEO Gavin Hudson said Tongaat was surprised at the notification by Barloworld that it believes a MAC has occurred. “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 a MAC has occurred.
“We do, of course, understand the impact that the COVID-19 pandemic and subsequent lockdown has had on most businesses, including ours, notably the combined impact of the alcohol ban and reduced manufacturing demand on the Starch business.
“However, we have taken this into account in our 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.
“We remain willing to work with Barloworld in a collaborative way to ensure the company has a better understanding of our Starch business. We remain committed to concluding this transaction as we believe the disposal of starch will position the group for longer-term sustainability. This will ensure we can deliver on our strategic business partnerships that will step-change our transformation initiatives, protect over 30 000 employee’s jobs and help support the economies of the countries in which we operate,” he said.
It is anticipated that the matter will be referred to an independent third party for review, whose decision about the MAC event will be binding and final.