Tongaat's shares fall on equity raise plans

17th November 2021 By: Chanel de Bruyn - Creamer Media Senior Deputy Editor Online

JSE-listed Tongaat Hulett's share price fell by nearly 43% on Wednesday after it announced a proposed equity raise to reduce its debt to a more sustainable level.

As part of the company's ongoing turnaround plans, it has already reduced its debt by 42% over the past two-and-a-half years.

However, to achieve a further reduction in debt to a sustainable level, and in line with the debt refinance currently being finalised with Tongaat's South African lenders, the company has been exploring strategic alternatives, including a possible equity capital raise by way of a rights offer of up to R4-billion.

Tongaat on Wednesday said that, while assessing strategic alternatives, it was approached by investment holding company Magister Investments, which has expressed an interest in making an equity investment in Tongaat.

Tongaat has entered into an underwriting, subscription and relationship agreement with Magister, in terms of which Magister has committed R2-billion to partially underwrite the rights offer.

The agreement is subject to Magister holding no more than 60% of Tongaat's share capital immediately following the capital raise.

The transaction is also subject to approval by shareholders.

Tongaat said the successful implementation of the rights offer would allow it to de-gear and substantially restructure its balance sheet, while also allowing Tongaat's management greater financial and operational flexibility to focus on Tongaat's operations and potential growth opportunities.

It added that Magister had experience in sectors that complement Tongaat's strategic focus areas and that Magister was expected to add value to Tongaat through its logistics, agricultural management and commercial experience.

Tongaat's share price fell to a low of R5.55 apiece on Wednesday morning.

By 13:00, its share price had recovered somewhat to R6.91 apiece, which was still more than 28% lower than Tuesday's close of R9.70 apiece.