• Kagera Sugar selected as strategic equity partner for Tongaat Hulett's sugar division.
  • Kagera Sugar's sugar assets in Tanzania and DRC to offer technical and operational knowledge.
  • Caution needed as acquisition may impact share prices of Hippo Valley and Tongaat.

Sandton- Tongaat Hulett Limited, a South African Agri-processing company, has selected Kagera Sugar Limited as the preferred strategic equity partner to acquire its complete sugar division in South Africa and the investments in Zimbabwe, Mozambique, and Botswana. Tongaat was recently at the centre of a storm involving accounts manipulation and gross mismanagement by the management, which dearly costed the company. Over the recent past, the Rudland brothers have placed a takeover bid, which some shareholders resisted. If the deal materialises Karega, an East African sugar processing company, will give Tongaat new markets and new energy through seconded management. The acquisition will ensure continuity for Tongaat's subsidiary units in Zimbabwe and Zambia and provide the South African business with access to technical capability to improve and retain jobs in KwaZulu-Natal while protecting the livelihoods of several stakeholders across Tongaat's value chain, including small-scale growers.

Kagera Sugar Limited, which is part of the largest group of sugar producers in Tanzania, owns sugar assets in Tanzania, the Democratic Republic of Congo, and the Middle East. The group's exposure to complementary sugar assets in Tanzania and the Democratic Republic of Congo offers relevant technical and operational knowledge to assist the turnaround of Tongaat's South African sugar assets, while the sugar refineries in Oman and Bahrain will provide access to world-class technologies and expertise to improve efficiencies.

The acquisition is in line with Kagera Sugar's overall strategy to expand its operations throughout Africa and become a leading sugar producer on the continent. The group is committed to investing significantly in the operations to modernize the plants and expand them to increase production and efficiencies.

Although the acquisition is a positive step for Tongaat Hulett and its subsidiary units in Zimbabwe and Zambia, there is a need for caution. Equity Axis, a financial research firm in Zimbabwe, has noted that the acquisition could result in a transfer of control and may have a significant impact on the share price of Hippo Valley on the Zimbabwe Stock Exchange (ZSE) and Tongaat at the Johannesburg Stock Exchange (JSE). Kagera Sugar will need to navigate various challenges in Zimbabwe and the region to achieve a turnaround. The transaction's impact on Hippo Valley and Tongaat's share prices will depend on how those challenges are ultimately addressed.

In conclusion, the acquisition of Tongaat's sugar division by Kagera Sugar Limited is a positive development for Tongaat Hulett and its subsidiary units in Zimbabwe and Zambia. It will ensure continuity for these units and provide access to technical capability to improve efficiencies. However, caution is needed, and investors should closely monitor the situation to assess its implications for the respective companies' financial performance.

-Equity Axis News