Tongaat Hulett delisting puts business rescue under the spotlight

You can also listen to this podcast on iono.fm here.

JIMMY MOYAHA: This morning, Tongaat Hulett Limited issued us with the unfortunate Sens announcement that confirmed that the company would be removed from the Johannesburg Stock Exchange’s listing board.

We’re going to be taking a closer look at this with independent analyst Dave Woollam, who joins us on the line now to see what we make of these developments. Dave, lovely having you on the show. Thanks so much for taking the time.

You and I have been keeping a very close eye on this Tongaat Hulett matter. It’s quite an unfortunate way for it to end at this stage, with the delisting of such a well-known company on the JSE.

I suppose many would say this was probably inevitable given the state of the business.

DAVE WOOLLAM: Yes, Jimmy, thank you for having me. I think this is somewhat performative and that it’s procedural; it’s a bit of a technicality.

The reality of the situation unfolded many years ago; the company has been suspended from the stock exchange since July 2022.

So shareholders have been unable to trade. Even if it were to have remained listed, there has been a complete blackout of information.

The audited financials that were supposed to have been released for 2022 were never released, neither for 2023 or 2024/5, et cetera – or 2026 for that matter.

So we have five years of no financial statements, which has meant that shareholders and stakeholders broadly have had to rely on piecemeal information from business rescue practitioners, which is not holistic and is in breach of the Companies Act – in breach of so many of the regulatory frameworks.

But there’s been this kind of pointing of fingers by every party.

ADVERTISEMENT

CONTINUE READING BELOW

The JSE says ‘You can’t be listed because you haven’t issued audited financials’, the auditors say they can’t issue audited financials; the company says they’re in the middle [of business rescue]; they can’t do anything about it.

But to be honest, it’s actually not acceptable and we’re seeing I think some of the unintended negative consequences of how business rescue is playing out in South Africa.

It really, I guess, has highlighted some of the cracks and I would certainly urge that some rethinking is done because this long, drawn-out process has not been good for any stakeholders, nor for the company and its employees.

JIMMY MOYAHA: Dave, you and I have kept an eye on this since way back in 2023 – shortly after the suspension of the shares from trading – and we’ve had numerous conversations around the business.

We’ve also heard numerous conversations from various interested parties on how we get this business out of business rescue, how to turn around the business, how we have seen the likes of Vision Consortium coming through to potentially buy out the business and try to rescue it.

Where does the business stand now? I know the Sens announcement that we had this morning provided us with a bit of an update around the state of the business at the moment.

DAVE WOOLLAM: Well, I think the only way to describe the business right now is that it is on life support, it is extremely fragile. It has practically no liquidity, so they’re having to pay creditors and employees and other obligations as and when cash comes in.

I will mention however that I think it’s not even correct to call this a ‘business rescue’. It doesn’t even meet the plain English terms of it. It’s a staged liquidation; it’s a managed liquidation.

The business rescue process I think has been weaponised by Vision to extract value out of everybody other than themselves.

And what I mean by that is, objective facts: Vision has never put one cent into the company. And if they challenge me and say well, they put R100 in, I’ll concede that, but no substantive money has been put in by Vision at all.

They have never put money in; they never planned to put any money in that we know of.

They borrowed money to buy the creditor claims. So we know they bought so-called R12 billion of creditor claims – but they borrowed money for the entire purchase of those claims. So they haven’t even put money into their own purchase of the creditor claims.

And in fact a large chunk of that money was provided by Standard Bank, one of the creditors they bought out, underwritten by the IDC [Industrial Development Corporation].

So it is the IDC who has really kept this company afloat, and I applaud them for that.

ADVERTISEMENT:

CONTINUE READING BELOW

They provided the P/CF [price-to cash flow] ratio, they provided ongoing liquidity, they provided an additional liquidity line quite recently when Vision flat-out refused to put any money in.

And what’s happened is that the power over those creditor claims has been used as a weapon to basically subdue everybody.

We know that they went to the South African Sugar Association [Sasa] recently, which is owed R525 million-odd, R520 million, and it’s a condition of the business rescue plan that they settle those claims as a condition of the business rescue.

We now know they went to Sasa and said ‘We can’t pay you; we’ll pay you out of the future profits of the company’. Well, that’s an absolute breach of the business rescue plan.

And yet everybody’s turning a blind eye and saying ‘Well, it’s too late, it doesn’t matter, we have to be realistic’.

But it seems to me that the system has been perverted to the point where it’s maximum gain for Vision, zero benefit for everybody else.

I think it’s a really sad outcome that business rescue, which is supposed to be a stakeholder-balanced process, has been starting to appear like a private liquidation which is very sterile and only for the creditors.

Business rescue is supposed to be a stakeholder-balanced process, and we just haven’t seen that here.

JIMMY MOYAHA: Dave, before I let you go, I want to take a look at what this delisting means for Tongaat shareholders.

We know that we’re expecting to see the termination officially take place on the 3rd of November, and this also does present quite an interesting opportunity, because – inasmuch as you have said that we haven’t received any of the financials – if there is to be a cleanup done on the business that can happen out of the public eye.

I suppose many might wonder – what, from a shareholder standpoint, is the effect this would then have on shareholders now that this has been made official?

DAVE WOOLLAM: Well, for shareholders it’s important to just emphasise that shareholders don’t have a right to anything other than the right to appoint the board, primarily, and to receive dividends.

ADVERTISEMENT:

CONTINUE READING BELOW

So they don’t own the assets, they don’t own the company. They have a residual right to it.

From that point of view I understand that shareholders are last in the queue.

This kind of codifies the fact that the shares are now delisted.

But the shares exist in the same way under the Companies Act as they always have and always will until the company is liquidated.

But the business-rescue process right now is extracting all the assets out of the company by way of the amended business rescue plan – and I use that term deliberately – so that there will be nothing left other than a bankrupt shell. So it will be liquidated in due course.

There’s a zero percent chance of any residual value in the company because all the assets are going to be – or are being – transferred out as we speak.

So what will be left is a bankrupt shell. It will be liquidated.

I guess the only ray of hope for all shareholders is that at some point they crystallise the loss and they get a capital gains relief on it.

It’s a macabre conclusion to all of this, but right now that’s the only hope I think people have.

JIMMY MOYAHA: More than seven decades of listed activity coming to an unfortunate end, with the end of Tongaat Hulett as a listed entity on the Johannesburg Stock Exchange officially being announced today by way of a news announcement.

We’ll have to leave the conversation on that note.

Independent analyst Dave Woollam joined us to take a look at Tongaat Hulett officially exiting the Johannesburg Stock Exchange come November 3rd, 2026.

#Tongaat #Hulett #delisting #puts #business #rescue #spotlight