South Africa’s heavily indebted sugar producer Tongaat Hulett is in a deadlock over the sale of its starch business to Barloworld over a condition set during the signing of a deal, the two companies said on Tuesday.
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Tongaat agreed to sell the business to Barloworld for 5.35 billion rand ($290.70 million), including debt, in February.
The deal is subject to certain conditions including that no “material adverse changes” (MAC) must occur after the signing of the agreement that could affect the business.
Barloworld said in a statement that a MAC had occurred given the effects of the coronavirus pandemic, which is likely to lead to a drop of about 82.5 per cent in earnings before interest, taxes, depreciation and amortization at the starch business for the financial year ending March 31, 2021.
Tongaat, however, is firmly of the view that a MAC has not occurred and has advised KLL Group, a wholly owned subsidiary of Barloworld, it said in a separate statement.
Since the two companies were unable to reach an agreement over the issue, they said the matter had now been referred for determination by an independent third party.
Tongaat said it was still committed to sell the business, which, according to its website, is Africa’s largest producer of starch, glucose and related products.