Obscure firm bets big on Tongaat stake
Evanstan Investments becomes one of the sugar producer’s largest shareholders
Little-known Evanstan Investments has become one of Tongaat Hulett’s largest shareholders after it bought 5.18% of the agri-processing company’s total issued shares.
On March 6, Tongaat’s major shareholders were the Public Investment Corporation (PIC) with a 13.69% stake, RMB IBD Leverage Finance and Depfin Investment, each with a 9.07% interest, and Investec with 4.18%.
Like Tongaat, Evanstan is based in KwaZulu-Natal. Its investment comes as the embattled sugar producer is taking steps to turn its fortunes around after financial irregularities resulted in inflated profits and assets. The company has been selling assets to reduce its debt, which stood at about R13bn.
The company recently announced it would sell its starch business to Barloworld for R5.35bn to reduce its debt.
Tongaat is selling assets in a bid to cut R8.1bn in debt by March 2021. The former blue-chip firm also intends to ask shareholders for about R4bn in a rights issue.
Chris Logan of Opportune Investments said on Sunday that despite the company’s negative equity of about R4bn, Evanstan’s move was understandable. He said the acquisition of the shares could be a speculative bet in the hope that Tongaat’s finances would improve. “I would not do it but it is understandable,” Logan said.
Logan said the accounting scandal at Tongaat destroyed a lot of shareholder value. In the past 12 months, Tongaat’s shares have lost more than 88% of their value, while the all share index is down by just more than 7% in the same period.
Between June 2019 and September 2020, Tongaat’s shares were suspended amid the accounting scandal, which culminated in the restatement of the company’s 2018 financial statements.
“Tongaat’s new management and board are doing a good job to address the debt and the negative equity. But the recession will not make their work any easier,” said Logan.
Tongaat shares were unchanged on Friday at R3.40.