South African sugar maker, Tongaat Hulett, announced a share dispersal for capital increase which led to a 28% drop in the price of those shares. Still, it appears that the Mauritian family company, Magister, will buy more than half of the shares.

"Magister will partially underwrite the rights offering up to a maximum of two billion rand, provided that its total stake in Tongaat does not exceed 60% immediately after implementation of the rights offering and underwriting," notes Tongaat Hulett.

Although it did not disclose the amount to be raised, Tongatt says the move "should allow the company to reduce debt to sustainable levels."

And according to the firm, Magister is an investment holding company focusing on long-term investments in agriculture, logistics and other sectors in southern Africa.

"We assumed that they would be a major shareholder at the end of the rights offering. But that will be determined in January or February next year," said Gavin Hudson, CEO of Tongaat.

Tongaat Hulett's two main areas of focus are sugar and property, following the sale of its starch business to Barloworld last year.

The core strategy is to deliver cost leadership as a sugar producer, predominantly focused on South Africa, Zimbabwe and Mozambique, and to capitalize on the considerable portfolio of prime commercial properties."

Meanwhile, the company is looking for ways to divest its properties to further reduce its suffocating debts of more than R6 billion.

The company's market value has reduced by almost 90% in the past two years, following disclosure that it had overstated its revenues, profits, and assets in past years.

Source: mw,com,dm.