Tongaat Hulett : PROPOSED EQUITY RAISE BY TONGAAT HULETT LIMITED

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PROPOSED EQUITY RAISE BY TONGAAT HULETT LIMITED 17 Nov 2021

The funding is set to bolster both Tongaat's investment proposition, and its socio-economic legacy across Southern Africa.

Tongaat Hulett today announced a proposed major recapitalisation via a rights offer of new shares, partially underwritten by Magister Investments Limited, a shareholder and strategic partner.

The proceeds from therights offer will be used to sustainably reposition the Group and help secure the future of its approximately 29 000 (at peak harvest season) employees in operations across South Africa, Zimbabwe, Mozambique, and Botswana. The Company's management team has progressed a turnaround strategy over the past two and a half years, positioning the Group for future growth by improving governance and operational efficiency, reducing debt, and driving cash flow. During this time, Tongaat has achieved a 42% reduction in debt levels through asset disposals, cashflow management and cost reductions. A successful rights offer will further reduce debt significantly, allowing management to focus on repositioning the business for long-term growth.

Tongaat's two primary focal points are sugar and property. The core strategy is delivering cost leadership as a sugar producer, predominantly focused on South Africa, Zimbabwe and Mozambique, and capitalising on the sizeable portfolio of premier commercial properties.

The Company is exploring the potential for property disposals to further reduce debt, and to provide additional cash flow in the longer term, and the potential for co-investment with developers to create sustainable revenue sources.

The amount of equity capital to be raised and the pricing of the rights offer is yet to be determined, but is expected to allow the Company to reduce debt to sustainable levels. Magister Investments Limited (Magister) will partially underwrite the rights offer up to a maximum of R2 billion, provided that its total shareholding in Tongaat does not exceed 60% immediately following implementation of the rights offer and the underwrite.

The timing to complete the proposed equity raise is dependent upon when the required shareholder, lender and regulatory approvals are obtained, but is expected to be Q1 calendar year 2022.

Magister is an investment holding company incorporated in the Republic of Mauritius and focuses on long-term investments in agriculture, logistics and other sectors across Southern Africa. Magister is also invested in Agriterra Limited, an AIM listed company in London.

Magister has vast experience in sectors which complement Tongaat's strategic focus areas and is expected to add value to Tongaat through such experience.

The introduction of Magister adds impetus to Tongaat's turnaround strategy and advances the objective of creating value for shareholders and Tongaat's other diverse stakeholders across Southern Africa.

Magister and Tongaat have entered into an agreement committing Magister to partially underwrite the rights offer subject to the adoption of various shareholder resolutions and approvals from the JSE, the Takeover Regulation Panel, the South African exchange control authorities and the competition authorities in South Africa, Zimbabwe, Botswana, Namibia and Mozambique.

A circular will be sent to shareholders with further details on the transaction, and a shareholders meeting will be convened at which the required shareholder resolutions will be proposed.

Tongaat Hulett, which produces approximately 43% of South Africa's sugar, has maintained its socio-economic contributions during the last two and a half years and will remain a partner of choice for all its stakeholders. The SA sugar operations source approximately 43% of their feedstock from more than 15 000 black farmers and cooperative members. The Company's successful transformational partnership, Uzinzo Sugar Farming, is the largest black grower in the SA sugar industry.

Tongaat Hulett is currently in a closed period in terms of the JSE Listings Requirements and will publish its interim results on 9 December 2021.

Tongaat Hulett CEO Gavin Hudson said: "A large rights offer, incorporating Magister's underwriting commitment, is a key step in securing the future of Tongaat Hulett. We look forward to it contributing to a market value of the Company which is more reflective of the underlying value of the Group's various components.

The rights offer represents a "once off" opportunity to reduce debt significantly and advance the goal of creating a sustainable capital structure, unlocking value, and making Tongaat an attractive investment option. We believe keeping the Group intact provides the most compelling value proposition for all our stakeholders across Southern Africa. Through the proposed re-capitalisation, the Group retains exposure to strong, well-invested sugar businesses in Zimbabwe, Botswana and Mozambique, and continued gains under the Sugar Master Plan for our recovering SA business. This leaves Tongaat well positioned to deliver value over time as it focusses on meeting the long-term demand for sugar across growing African regional markets."