Media24 divestment good news for Novus
Novus’s share price bounced back on Wednesday after a sharp fall on Tuesday. The fall followed the Competition Commission’s recommendation that controlling shareholder Media24 reduce its stake in the printing company from 66% to 19%.
Novus has been part of the Naspers-Media24 group for decades. When Naspers was predominantly a print media company, Novus (previously Paarl Media Group), was an important part of the group.
More recently, other sources of income began to overtake its print interests and Novus’s position diminished. Industry sources say tension between Novus and Media24 has been rising, aggravated by Media24’s perception that its contract with Novus was too costly.
There are a few reasons why the Novus share price might have bounced back on Wednesday as shareholders would have paused to consider the implications of this week’s recommendation from the commission. One is that despite Media24 shedding its controlling stake, it’s unlikely that Novus will lose much of the media group’s printing business. In the short term, the only real alternative would be Caxton. Given the hostility between Naspers and Caxton, there is little chance any Naspers subsidiary would direct much business Caxton’s way.
A second reason is that shareholders have known since January that the critical printing contract was up for renewal. Media24 announced as much in early January, when Novus director Lambert Retief died. The contract, rather than the shareholding, is the critical link between Novus and Media24.
Also, Naspers is keen to split off its controlling stake in Novus. The commission’s recommendation has probably just brought it forward a few months.
Of course, once Novus is unbundled, it should be clearer how Media24 is coping with the pressure on the traditional print media. Up to now, that picture has been blurred by inclusion of Novus’s printing operations.
Investment companies are judged mainly on their ability to secure — at a reasonable price — viable long-term investments that generate sustainable returns. So, there has been a buzz about the pending listing of Brian Joffe’s new investment company, Long4Life.
One development that has been slightly overlooked is that empowerment company Brimstone secured a meaningful minority stake in Long4Life.
Brimstone has proved to be a hard-working and trusted empowerment partner. The interaction with deal-making doyen Joffe will be fascinating to monitor, remembering that Brimstone will be able to pass on deal-making proposals that don’t fit its criteria.
Aside from making astute long-term investments, Brimstone should also be commended for its timely exit of investments. In 2016, it sold its 15% stake in fast-food franchising business Taste Holdings.
Despite Taste bringing on board iconic global brands, Brimstone clearly felt the riskreward ratio was unappetising, though some observers say it should have been more patient.
The details are not known, but it is estimated that Brimstone sold Taste at close to 255c a share, meaning a profit of 180c to 190c. It seems it did well to drop Taste, which now trades at about 190c. With another rights issue pending at Taste, shareholders are going to need strong stomachs.