SA investors faced with Hobsons choice over possible takeover of Tongaat Hulett by Zims Rudland family Tim Cohen 10 Jan 2022 The South African investment community is on the horns of a dilemma regarding the underwritten rights offer for Tongaat Hulett either do a deal with one of Zimbabwes most notorious families or face the break(cid:2)up of southern Africas leading sugar producer. Tongaat Hulett has been through the wringer over the past few years following the discovery of accounting irregularities in 2019, which resulted in the company having to restate its results and being fined by the JSE. The result was an implosion in the companys share price which, in 2018, was trading at around R130 to the roughly R6 at which it is trading today. Despite a clean-up campaign, an extensive investigation by PwC and a new management sweep, the company is still struggling. The share price implosion has had the effect of rendering the companys balance sheet on the verge of being unsustainable, and its huge debt load of roughly R6.6-billion is now at risk, causing a minor panic among its bankers. Into this morass has jumped a Mauritius-registered company, Magister, which is owned and controlled by members of Zimbabwes Rudland family, who have reportedly been consistent supporters of Zanu-PF and its leadership. The family also owns the Gold Leaf Tobacco company, which, by some estimates, is the largest cigarette company in South Africa measured by the number of cigarettes sold. The company burst into the public spotlight when co-owner Simon Rudland survived a gangland- style assassination attempt in August 2019. There is no direct link between Magister and Gold Leaf, which is represented by Simon Rudlands brother, Hamish, whose main business is in the transport industry. However, several reports have warned about Zimbabwes recent descent into a Russian-style oligarchical system. Its becoming a regional hub for laundering illicit wealth that is fuelling violent conflict, one report concludes. It also included a detailed breakdown of the alleged activities of the Rudland family, including gold smuggling, money laundering and mining in conservation areas. Magister announced on 17 November 2021 that it would underwrite the first R2-billion of a R4-billion rights offer. If successful, the rights offer will go a long way towards solving Tongaats debt problem and will probably maintain the integrity of the company. The drama of the rights offer is illustrated by the fact that Tongaat currently has an equity value of R770-million. The rights offer therefore has the likely outcome that it will completely transform the ownership structure of the company. In terms of the deal, Magisters shareholding is capped at a maximum of 60% of the enlarged shareholding. Magister will receive a board seat for every 20% of the company that it owns, post the rights issue. It will also receive a fixed underwriting fee of 1.5%, or R30-million. Tongaat itself has few other options out.