Barloworld has triggered a rarely invoked material change clause, but the deal may be renegotiated
Darnall Mill: One of Tongaat Hulett’s four mills in KwaZulu-Natal. Picture: TONGAAT
Tongaat, once one of the country’s most recognisable blue-chip stocks, is in the middle of a a revival strategy that includes slashing its R13bn in debt by about 60%, tapping shareholders for about R4bn, and selling assets after a weak operational performance in recent years coincided with allegations of dodgy accounting practices.
However, Barloworld has since triggered a material change clause — a rarely invoked clause in mergers and acquisitions that allows buyers to withdraw from deals if the value of the transaction has been undermined by a significant development. Barloworld may have realised it was overpaying for the business, given the economic effects of the coronavirus outbreak, and it is also unsurprising that Tongaat would want to stick to the terms of the sale, said Wayne McCurrie, a portfolio manager at FNB wealth and investments.
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