SOUTH African aluminium and sugar firm Tongaat-Hulett Group, which last week announced plans to acquire Anglo American’s stake in Zimbabwe’s Hippo Valley Estates, is to split into two entities and list its aluminium business Hulamin on the Johannes
The company said yesterday that it would split into two listed entities, Hulamin and Tongaat-Hulett (TH), and return R500 million to TH shareholders through a share buyback.
It is expected that Hippo Valley Estates, a sugar firm, would fall under the group’s sugar subsidiary after the split.
The group will sell a 25% stake in TH and 15% of Hulamin to black investors in line with the government’s black economic empowerment (BEE) programme. Tongaat-Hulett is majority-owned by Anglo American plc.
The capital return will optimise the capital structures of TH and Hulamin, to facilitate the introduction of the BEE interest while leaving both companies “with the balance sheet capacity to undertake meaningful growth projects”, Tongaat-Hulett Group said.
Anglo American said the Tongaat-Hulett and Hulamin deals represented further progress in advancing Anglo’s strategic targets aimed at focusing on core mining activities.
“Further to these transactions, Anglo American’s shareholding in Tongaat will reduce from 51% to 38% and its shareholding in Hulamin will be an effective 39%, down from 45%,” Anglo said.
Tongaat-Hullet Group said based on its closing share price of R106 on December 11, the split in the group implied an enterprise value for TH of R8,27 billion and for Hulamin of R6,6 billion, it said.
The transaction is subject to a number of conditions, including regulatory and shareholder approval. The company gave no date for the unbundling and listing of Hulamin.
Tongaat-Hulett said last week that it would acquire Anglo American’s 50,35% stake in Hippo Valley Estates through its Zimbabwean subsidiary, Triangle Sugar Corporation, for US$36 million.
Anglo American said it would sink the money raised from the disposal into its Unki Platinum Project which it is undertaking jointly with Anglo Platinum.
Hippo Valley owns and operates the second largest sugar producing and refining business in Zimbabwe and is listed on the Zimbabwe Stock Exchange.
The acquisition would almost double Tongaat-Hulett’s production in Zimbabwe and boost its capacity in southern Africa by a further 300 000 tonnes to 1,5 million tonnes a year, the company said in a statement.
Anglo American owns the holding in Hippo Valley through its Anglo American Corporation Zimbabwe (AmZim), which will, through the deal with Tongaat Hulett, dispose of all its Zimbabwean sugar assets.
Tongaat-Hulett said in a note to shareholders last week that Triangle would issue shares representing a 25,3% interest to AmZim.
Subsequently, Tongaat-Hulett will, through a wholly-owned foreign subsidiary Bassieres Holdings, acquire these shares for a purchase price of US$36 million.
This will be funded from Tongaat-Hulett’s existing offshore cash resources.
“This acquisition provides the opportunity to extract the synergistic benefits available from the operations of these two large world-class sugar enterprises with the two sugar factories being only 30 km apart and the cane estates practically side-by-side,” Tongaat-Hulett chief executive Peter Staude said.
“World sugar markets are presenting exciting growth opportunities for Tongaat-Hulett. The previously announced EU sugar reforms, in particular the world-trade organisation ruling with regard
to EU exports that will result in them reducing from five million to seven million tonnes, to a maximum of 1,4 million tonnes from next year, the increasing use of sugar cane for ethanol production and the
fact that the world sugar consumption growth rate is 2% per annum are all contributing factors” Staude said.
Anglo American’s disposal of the stake in Hippo Valley follows sales by the group of ferrochrome and nickel assets in Zimbabwe — Bindura Nickel in 2003 and Zimbabwe Alloys in 2005.
It also owns just over 50% of Tongaat-Hulett, but has indicated that it plans to sell the stake.
Further, because the transaction is a reorganisation of Anglo American’s sugar interests in Zimbabwe, the acquisition will not trigger an offer to Hippo Valley’s minorities, Tongaat-Hulett said.
The deal comes just ahead of Tongaat Hulett’s unbundling in 2007, when Pietermaritzburg-based Hulett Aluminium (Hulamin), in which it holds a 50% stake, will be unbundled and listed
separately on the Johannesburg bourse. — Reuters/Staff Writer.