Tongaat and Barloworld still at odd over starch deal

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Tongaat and Barloworld still at odd over starch deal

Published Date: 2020-06-05 | Source: Stephen Gunnion | Author: Stephen Gunnion

Tongaat and Barloworld still at odd over starch deal

The two companies have been unable to agree on an arbitrator to decide whether a material adverse change has occurred due to Covid-19.

Tongaat Hulett will ask shareholders to approve the disposal of its starch business to Barloworld subsidiary KLL at a general meeting today even though the transaction still hangs in the balance. Due to the potential impact of Covid-19 and the national lockdown, KLL maintains that a material adverse change (MAC) has occurred that will result in a breach of the sale conditions.

The R5.35 billion disposal of Tongaaat Hulett Starch to KLL was announced in February as part of the agricultural group's strategy to reduce debt. The disposal agreement was conditional on no event occurring after signature that resulted in an MAC. However, last month KLL said the pandemic meant the starch business was unlikely to meet a threshold of at least 82.5% of 2020 earnings before interest, tax, depreciation and amortisation (EBITDA) for the year to end-March 2021. EBITDA is seen as an important measure of a company's financial performance.

The two companies were unable to agree on whether a MAC had occurred or not and said the matter would be left to an independent third party to decide. Barloworld said yesterday they were also unable to agree on the appointment of one of the two parties identified in the sale and purchase agreement to act as an independent accountant. As a result, it said the process would take longer to complete than the six to eight weeks announced on 12 May.

Tongaat said yesterday that the disposal agreement was still of 'force and effect' and that it remained committed to meeting all the conditions required for the deal to go through, including the processes of seeking regulatory and shareholder approval.

Tongaat's shares rose 0.3% to R5.92 yesterday while Barloworld closed 0.5% higher at R72.65.





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