Tongaat Hulett to sell starch division to Barloworld for R5.35bn

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Tongaat Hulett to sell starch division to Barloworld for R5.35bn

7:45 CAT | 28 Feb 2020

A Tongaat Hulett sugar cane field. {Picture: Bloomberg/Waldo Swieger]

JSE-listed Tongaat Hulett will sell its starch business to Barloworld for an enterprise value of R5.35-billion.

Tongaat will use the proceeds to reduce its debt.

“This was a compelling offer for our starch business. Our number one priority is to ensure the long-term sustainability of Tongaat and a key element of this is paying down our debt as quickly as possible. 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,” Tongaat CEO John Gavin Hudson said in a statement on Friday.

“We have said for some time that we would consider a number of opportunities to reduce our debt and stabilise the business, including the sale of both core and noncore assets. Other debt-reducing activities include accelerating operational efficiencies, and a potential strategic equity capital raising initiative”.

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 (TSH), which, according to its website, is Africa’s largest producer of starch, glucose and related products.

Shares in South Africa-based Tongaat closed up 2.5%. ($1 = 15.2377 rand)

Source: Engineering News / Reuters