Who is really behind the R2bn Tongaat Hulett bid?

WHO sits behind Magister Investments, the prospective new owner of the sugar giant? This mystery is now front and centre in a last-ditch battle by minority shareholders to block the controversial R2 billion deal.

It has emerged that Magister Investments, the obscure Mauritian company planning to take control of Tongaat Hulett, has a 41% mystery shareholder who has been identified only as "family" of the public face of the controversial deal - Zimbabwean businessman Tongaat Hulett.

This revelation seemingly vindicates concerns that Hamish's older brother, Simon, might be involved in the bid.

This in turn opens the door to fears that Simon's Gold Leaf Tobacco Corporation, which faces persistent allegations of involvement in illicit tobacco trading, could be funding or backstopping the bid.

Adding to questions about Simon is circumstantial evidence suggesting he may have links to South Africa's shady world of gold trading.

AmaBhungane has confirmed, via Gold Leaf's lawyer, that the business was included in a series of raids conducted by the South African Revenue Service last week, through its syndicated tax and customs crime division, though it is not clear exactly why Gold Leaf was targeted.

Association with Gold Leaf and Simon Rudland could, therefore, hold tangible reputational and financial risks for Tongaat.

Up till now, both Hamish Rudland and Tongaat have been at pains to emphasise that the brothers "have pursued their own business trajectories and Hamish has no involvement in Simon's tobacco businesses".

Hamish, in a response to previous amaBhungane questions, also explicitly asserted that Gold Leaf did not "have anything to do with the transaction between Magister and Tongaat".

Now it turns out that Magister has not been completely candid about its shareholding.

In the circular prepared for the transaction, the impression was given that all of the shares in Magister were held for the benefit of Hamish, his wife and children.

But new disclosures extracted by shareholders who are challenging the takeover show that other unidentified Rudland family members effectively control 41% of Magister.

In addition to raising the question of whether Simon somehow sits behind Magister, the new information also adds to suspicions that Simon's partner in Gold Leaf, Ebrahim Adamjee and his family, could have co-ordinated with Magister to push through the Tongaat deal by buying up shares before shareholders voted on the transaction.

Takeover regulations preclude shareholders that are not "independent" from voting on the type of resolution that underpins the Tongaat transaction - a waiver of certain minority rights.

The parties have denied they acted in concert in any way - which would have been unlawful in these circumstances.

However, new documents show that Tongaat chief executive Gavin Hudson had last-minute concerns about the Adamjees' "independence" and, fearing a challenge to the deal, personally intervened to stop the Adamjee interests from voting in favour of the transaction.

Perhaps tellingly, Tongaat's Hudson seemingly achieved this by writing to Magister instead of the Adamjees themselves.

These and other new details around the deal are contained in submissions and counter-submissions made to the Takeover Regulation Panel (TRP) by Magister and Tongaat on the one side and, on the other, a consortium of minority shareholders who are fiercely opposed to the transaction.

The opposition group, led by Artemis Properties, owns a collective 11% of Tongaat.

Tongaat management has enthusiastically endorsed Magister as a white knight that will inject cash and reduce the sugar group's massive debt burden.

The transaction with Magister was first announced in November and approved at a general meeting of shareholders in January, despite resistance from the Artemis group.

Concerns about getting into bed with disreputable, new controlling shareholders aside, the deal is considered prejudicial to existing shareholders for two reasons.

First, because the issuing of new shares to Magister will significantly dilute the value of the existing shares.

Second, because the Magister offer is contingent on a waiver of minority rights, meaning that Magister will not have to make a mandatory offer to buy out minority shareholders.

Since the passing of control without affording minorities a chance to get out is a prejudicial step, this waiver requires the approval of the independent holders of more than 50% of the issued shares.

No shareholder to whom the buyer is a "related or inter-related person, or person acting in concert with any of them" may take part in that vote, because they are not considered "independent".

In January, TRP, a government agency that oversees large corporate transactions, approved the waiver and takeover.

The aggrieved shareholders soldiered on, trying to block the deal through an appeal to the TRP's Takeover Special Committee (TSC). On March 11, 2022, the date on which the TSC was scheduled to deliver its ruling, the Artemis group successfully petitioned the TSC to reopen the proceedings so they could make additional submissions on the role of the Adamjees.

On March 18, TSC delivered its verdict, dismissing most of the Artemis group's objections, but ordering an investigation into one key claim relating to Adamjee and another Tongaat shareholder, Betelgeux, which his son Aadil allegedly controls.

Legislation provides that a waiver vote by independent shareholders would be rendered void if any share acquisitions were made by Magister "or by any of their respective concert parties" in the time between the transaction announcement and date of the waiver.

Artemis alleges this is what happened.

In its ruling, TSC stated: "The Applicants [Artemis] allege that Adamjee is an inter-related party with Magister and that Betelgeux is ‘probably' an inter-related party with Magister, through Adamjee. The applicants also assert that Adamjee and Betelgeux are or ‘likely' concert parties as the term is defined in the Companies Act."

TSC noted that Magister and Tongaat denied these claims, but ruled they were serious enough to warrant further inquiry: "TSC views the alleged transgressions in a very serious light. TSC is of the firm view that these allegations must be investigated extensively and fully to get to the bottom of this issue."

Tongaat has confirmed that this puts the transaction on hold: "Tongaat Hulett will not proceed with the transaction in its current format until the TRP investigation has been concluded and this condition precedent has been fulfilled, together with the other required approvals, namely competition commission approvals in Mozambique and Zimbabwe."

Magister, Tongaat and the Adamjees may still refute the claims by the Artemis group. They have until 14 April to deliver their versions to the TRP inspector appointed to investigate the allegations.

Who is Magister, really?

When the deal was announced it was strongly implied in the circular released by Tongaat that Magister had only one beneficial owner:

"Magister has advised that it is controlled by Mauritian International Trust Company Limited as Trustee of the Casa Trust, a trust operating for the benefit of Hamish Rudland, his wife, and their children".

This accorded with Hamish Rudland being the public face of the deal and the repeated insistence that his controversial brother Simon and his tobacco empire have nothing to do with it.

In its submission to TSC, Magister repeated the point a number of times:

"Although Simon and Hamish are brothers, they have pursued their own business interests over the past 20 years, following their initial beginnings together in the transport industry in the 1990s.

"Simon and Hamish have pursued their own business trajectories and Hamish has no involvement in Simon's tobacco businesses."

Magister in its submission, however, also revealed that Hamish's Casa Trust in fact only accounts for 58,67% of its shares. According to Magister's submission, the balance is owned by other, unidentified members of the Rudland clan:

"Family members of Hamish, and/or trusts operating for the sole and exclusive benefit of family members of Hamish, are the beneficial owners of the other 41,33% (forty-one point three three percent) of the issued securities in Magister."

Magister nonetheless insists that it is still the Casa Trust that "controls (to the exclusion of all other persons) Magister".

Mysteriously, given its apparent desire to quash concerns that Simon is involved, Magister shot down the Artemis group's request for further clarity in an exchange of lawyers' letters in February.

"Our client is unaware of any legal basis which entitles your client to request our client's securities register. In the circumstances, our client will not be disclosing its securities register to your client … It is clear that your client is on a fishing expedition in an attempt to bolster its Appeal against Tongaat and our client, which is devoid of any merit," Magister's representatives Alex Peral and Charles Ancer from Fluxmans wrote.

The fact that other unknown Rudlands are backing the deal compounds the mystery of how the obscure Magister, with few known investments of substance, mustered R2 billion to buy Tongaat shares.

Long before the deal was announced, the Rudlands had already sank roughly R120 million into Tongaat shares, again allegedly without the involvement of Simon.

In March and April last year a United Arab Emirates company called Braemar, allegedly wholly owned by Hamish and Simon's mother Adrienne, bought just shy of 10% of the sugar group.

This already made the Rudlands the largest single shareholders in Tongaat, but since only independent shareholders can vote for a takeover, this could not help them push through the Magister deal.

Enter the ‘independent' Adamjees

TSC rejected a number of technical grounds on which the Artemis group had challenged the approval given to the Magister transaction.

What remains is the allegation that Magister acted "in concert" with a South African business family deeply entwined with the Rudlands - the Adamjees.

The background to this is that Ebrahim Adamjee - as well as an apparently Adamjee-owned company called Betelgeux Investments - bought up significant amounts of Tongaat shares right after the transaction was announced, but before the vote to approve it.

Betelgeux shares an address in Linbro Park with Adamjee. Share certificates show that Adamjee Group Enterprise is the sole shareholder of Betelgeux and the directors of Adamjee Group are Aadil and Sahair Adamjee - Ebrahim's son and wife respectively.

Adamjee and Betelgeux bought up just under 5% of Tongaat, making them by far the largest traders in Tongaat shares in this period.

Conspicuously, they together bought exactly 4,95% of Tongaat while 5% is the threshold for related parties being legally obliged to report their collective share acquisitions.

Recall that Ebrahim Adamjee is Simon Rudland's partner in Gold Leaf.

At the TSC the Artemis group argued that, legally speaking, "Mr Adamjee is an inter-related party with Magister and that Betelgeux is probably an inter-related party with Magister."

The legal effect would, Artemis argues, be to immediately nullify the waiver Magister had gotten and likely sink the whole deal.

In its ruling on March 18, TSC referred this one issue back to the TRP for investigation. There is at least one compelling piece of evidence suggesting a coordinated attempt to ensure the deal went through.

On Saturday, January 15, three days before shareholders had to vote on the deal, Tongaat chief executive Gavin Hudson sent an "urgent" letter to Hamish Rudland.

In it, he seemingly asked Magister to instruct the Adamjees to withdraw the voting instructions in favour of the waiver they had already lodged because it could endanger the deal.

"With reference to our conversation earlier, it has come to our attention that the following share purchases have recently been made … and that these parties have submitted voting instructions for the general meeting to be held next Tuesday," Hudson said in reference to Adamjee and Betelgeux's purchases.

"We have noted from a Google search that members of the Adamjee family have relationships with certain members of the Rudland family."

"If the parties referred to above vote on the resolution and are not independent, this will create a risk of objections being raised with the Takeover Regulation Panel on the validity of the resolution. We reiterate in this regard that the question as to ‘independence' is a matter of (potentially complex) legal interpretation dependent on the specific circumstances, and that a conservative approach should be adopted so as not to risk the integrity of the resolution.

"In light of the above, we strongly recommend that the parties referred to above amend their voting instructions so that they do not vote on ordinary resolution number 1."

Hudson's directing this plea to Magister instead of Adamjee and Betelgeux seems to indicate he believed Magister could instruct these supposedly independent parties how to vote.

Hudson also feared that the Adamjee share purchases might force a related-party declaration.

"Finally, our advisors have asked that we send a reminder of the provisions of section 122 of the Companies Act which requires a person to notify THL if that person and related and inter-related persons and concert parties acquire a beneficial interest in securities resulting in them holding in total a beneficial interest of 5%."

In other words, Hudson was warning Magister that the Adamjees were close to having to declare their share purchases - and declare whether they are related to Magister. Despite Hudson's apparent assumptions, Magister's lawyers wrote back, saying:

"Mr Adamjee has no relationship with Magister … Magister has no knowledge of Mr Adamjee purchasing shares in THL; and … Magister has neither knowledge nor influence over the share transacting and voting decisions made by Adamjee and his associates."

Nonetheless, Adamjee and Betelgeux both changed their voting instructions in the next two days.

"As a matter of fact, Adamjee and Betelgeux abstained from voting on the relevant resolution," Tongaat said in its submission to TRP.

Looking for more hidden hands
There are now question marks hanging over a number of parties involved in the Tongaat deal, and the ongoing investigation by TRP could yet flush out more hidden hands.

In a new submission to the TRP investigator, the Artemis group has called on the TRP inspector, Zano Nduli, to procure the share registries of a list of involved parties that might show involvement of Simon and the Adamjees.

This includes unveiling the mystery owner of 41,33% of its shares itself and establishing for certain that Hamish and Simon's mother Adrienne is really independently investing in Tongaat through Braemar in the UAE.

Apart from the Adamjees, there were also a number of other mysterious buyers of Tongaat shares between the November announcement and the vote in January that Artemis wants probed.

Unknown offshore investors bought 1,2% of Tongaat via corporate nominees in the same period the Adamjees bought their shares, the sugar company's share registry shows.

The Artemis group has called on the TRP inspector to establish whether any Rudland or Adamjee family members were involved in these purchases.