South African sugar producer Illovo Sugar announced on Monday that it has entered into an agreement to sell its interests in the Gledhow sugar mill and refinery and the associated cane-growing estates to broad-based black economic empowerment (BEE) company Grand Bridge for R335-million.
The transaction will result in a BEE company holding a major sugar asset and will secure BEE participation in the South African sugar-milling industry.
Illovo Sugar, which is the largest sugar producer in Africa, has an active BEE programme and this transaction is further evidence of its continued efforts to promote sustainable broad-based black opportunity and empowerment.
The company states that it is confident that the transaction will grant additional access to the sugar industry to a wider section of the community.
Grand Bridge will acquire the assets and liabilities of Gledhow, including its associated agricultural properties, from Illovo Sugar as a going concern.
The consideration payable is R335-million and will be settled in cash by Grand Bridge using a loan from the Land and Agricultural Bank of South Africa.
To achieve the broad-based empowerment intentions of Illovo Sugar, the sale agreement stipulates that:
- The majority of the shares held by Grand Bridge should be drawn from previously politically disadvantaged persons;
- Equity participation of not less than 20% in Grand Bridge must be held by or for the benefit of employees of Grand Bridge; and
- The majority of the sugar-cane producing agricultural land acquired should be subdivided into medium- and/or small-scale farms and allocated for acquisition by previously politically disadvantaged persons.
The effective date of the sale is June 1 2004 and it is subject to the approval of competition authorities. Shareholders will be advised once this condition precedent is fulfilled.
Illovo Sugar will continue to manage the business for a period of five years from the effective date.
The major shareholders of Grand Bridge include the Sokhela Family Trust and the Gledhow employees, with the balance held by black community organisations, businesses and individuals.
Gledhow is located on the north coast of KwaZulu-Natal, adjacent to KwaDukuza.
Annually, the mill crushes approximately 1,4-million tons of cane and produces about 150 000 tons of sugar, constituting about 6% of South Africa’s annual sugar production and a similar share of the annual sugar output of the Illovo Sugar group.
Using additional raw sugar brought in from other sugar factories, the refinery produces about 160 000 tons of white sugar a year, which is sold to industrial and consumer markets.
The properties include approximately 6 900ha cultivated to sugar cane, which yields about 300 000 tons of cane a year.
Currently Gledhow employs 540 people in its agricultural and manufacturing operations.
Illovo MD Don MacLeod described the deal as a ground-breaking transaction.
“We are delighted to be introducing direct and broad-based BEE into the sugar-milling industry in South Africa. We will work closely with Grand Bridge in promoting the long-term sustainability of the business. The proceeds from the sale will be used to strengthen the balance sheet in preparation for future growth in new and existing areas within Africa.”
Grand Bridge chairperson Dr Patrick Sokhela commented: “We are proud to have reached agreement in this exciting transaction. It will allow for the participation of a wide range of local communities in the future business potential at Gledhow, as well as its employees and other regional groupings. We look forward to partnering Illovo through the next five years to ensure the highest standards of operational excellence are maintained.
“We have been negotiating with Illovo in respect of putting a BEE deal on the table since 2000 and I commend Don MacLeod and his team for the patience and support we have received from everyone at Illovo.”
Illovo Sugar’s final reporting period closed at the end of March 2004 and the publication of these results is scheduled for May 19 2004.
Consequently, it would not be meaningful to disclose the financial effects of the transaction based on outdated financial information. The financial effects of the transaction will be disclosed to shareholders in terms of a subsequent announcement, following the publication of the final results of Illovo Sugar, and will be based on these final results. The financial effects on the earnings of Illovo Sugar are not considered to be material.
Shareholders are advised to exercise caution when dealing in the shares of Illovo Sugar until disclosure in this regard is made. — I-Net Bridge