Bruce Whitfield
Illovo is facing political opposition to the sale of its stake in a local sugar and hotels group in Mauritius.
Illovo’s sale of its 80% stake in Mauritius-based sugar and hotels group Mon Tresor Mon Desert (MTMD) could be reversed due to pressure from that country’s official opposition party and trade unions. They argue the transaction is not in the island state’s best interests and have asked the Supreme Court to force the government to take another look at the deal. According to the Indian Ocean Press Association a preliminary hearing has been set for April 23.
There could be a positive spin-off for Illovo shareholders if the deal is reversed, as there is a second consortium in Mauritius prepared to pay up to 50% more for MTMD.
Illovo says it is certain its current agreement will stand and any opposition is no more than politicking by the local parties. It says it already has the R472-million purchase price in the bank and has handed the MTMD shares to the Mauritius consortium. ”It’s a very political issue in Mauritius, but we’re not concerned. It’s highly unlikely that anything will come of the court action,” says financial manager Dave Howse.
Howse was unable to comment on the alternative offer made to Illovo for the MTMD shares. But correspondence between Gerard Maujean, MD of Mauritian company Coprim Ltd, and Illovo MD Don McLeod suggests Illovo may have been able to get a higher price for the MTMD stake, but Coprim’s approach came too late. McLeod turned down a request from Maujean for a meeting, saying an agreement had already been signed with the first group, and subject to certain conditions being fulfilled, it would become unconditional. But he left the door open for discussions if the deal fell through.
Howse insists that in the ”highly unlikely” event of the MTMD deal being reversed, it would have no impact on Illovo’s planned acquisition of Tate and Lyle’s 50,9% stake in Lusaka-listed Zambia Sugar plc.
Illovo said in a statement in February that the sale of the Mauritian assets would enable the group to reduce its current debts and also ”provide the necessary cash resources” with which to purchase the stake in the Zambian operation, suggesting it was dependent on raising money through the Mauritius transaction. But on Tuesday Howse said the deals could be done separately.
While Illovo appears certain that local politics will not affect the MTMD deal, the president of the Mauritius Labour Party Jean Francois Chaumiere has signed an affidavit claiming the structure of the deal, which was finalised on April 6, means the Mauritian government would lose out on $156-million in capital gains and other taxes.