Why this analyst thinks the Tongaat- Barloworld deal is dead in the water

In a recent interview on CNBC Africa, Makwe Masilela, the Chief Investment Officer at Makwe Fund Managers, shared his insights on the local markets and the potential Tongaat- Barloworld deal. Masilela expressed skepticism about the deal, stating that he believes it is unlikely to come to fruition. Despite Tongaat's CEO's confidence in the value of the business and projections, Masilela argues that the success of the deal ultimately hinges on the willingness of both parties to agree on a price. With Tongaat's current market value at around 11 billion and a negative PE ratio, Masilela highlights the company's poor return on equity and return on assets, indicating significant financial challenges that could hinder the deal from moving forward. Masilela's assessment of the situation raises concerns about the feasibility of the Tongaat- Barloworld deal. The discrepancy between the company's market value and its financial performance suggests that investors may be hesitant to proceed with the acquisition. As Masilela points out, a willing buyer and a willing seller must align on the terms of the deal, especially when significant financial risks are involved. Despite Tongaat's optimistic outlook on the business's future earnings, Masilela underscores the importance of responsible decision-making by the board of directors to safeguard shareholders' interests. The high debt levels relative to the market value further complicate the feasibility of the deal, casting doubt on the likelihood of its successful completion. In light of Masilela's concerns and analysis, investors and stakeholders closely monitoring the progress of the Tongaat- Barloworld deal may need to reassess the potential risks and benefits associated with the acquisition. The future of the deal remains uncertain, pending further evaluation and discussions among the involved parties.