SMALL PRINT

It’s time Me­dia24 got used to the new en­vi­ron­ment and stopped scor­ing own goals, writes Ann Crotty

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It’s time Me­dia24 stopped scor­ing own goals

What is go­ing on with Novus? Or, rather, what is go­ing on be­tween Novus and Me­dia24?

Novus, which used to be Paarl Me­dia, was once an im­por­tant part of Me­dia24. That was when Me­dia24 was an im­por­tant part of Naspers, way back in the 1990s be­fore DStv be­came the most im­por­tant part, by far, of Naspers. Then, in the early part of the 21st cen­tury, its in­ter­est in the Chi­nese IT in­dus­try be­came the most im­por­tant part of Naspers. DStv re­mained im­por­tant, but print me­dia in par­tic­u­lar bat­tled to deal with the changes the IT in­dus­try wreaked upon it.

It’s not that Novus isn’t a sub­stan­tial busi­ness in its own right — it is the largest print group in SA, with an­nual rev­enue of more than R4bn and an at­trac­tive 15.5% profit mar­gin — it’s that Naspers has moved on to much big­ger things. Frankly, most things look rather in­sub­stan­tial next to China-based Ten­cent, which has grown at a dizzy pace since it was ac­quired in 2003.

But from a once-in­te­gral part of the Naspers pub­lish­ing em­pire, Novus is now be­ing shuf­fled about like some on­celoved aunt who has be­come a bit too dif­fi­cult and needs to be sorted out once and for all.

The trou­ble started in 2014 when Lam­bert Retief, former Novus CEO and a ma­jor force in build­ing the busi­ness, an­nounced he wanted to sell his 20% stake and re­tire. Me­dia24, which held the other 80%, was the ob­vi­ous buyer.

It seemed straight­for­ward. Though he had a com­par­a­tively small stake, Retief was deemed to have joint con­trol of Novus with Me­dia24, which meant the deal would re­sult in a change from joint to sole con­trol. In turn, this meant the deal would have to be ap­proved by the com­pe­ti­tion au­thor­i­ties.

How­ever, when print and pub­lish­ing group Cax­ton ap­plied for and was granted in­ter­ven­tion sta­tus at the com­pe­ti­tion tri­bunal hear­ing, things started to get com­pli­cated.

With in­ter­ven­tion sta­tus, Cax­ton was able to point out that Novus and Me­dia24’s ap­pli­ca­tion was de­fec­tive be­cause of in­suf­fi­cient de­tails about the two com­pa­nies’ direct and in­di­rect share­hold­ings.

The tri­bunal called on Me­dia24 and Novus to sub­mit de­tails about all the firms di­rectly and in­di­rectly in con­trol of Naspers.

This was pre­cisely the in­for­ma­tion that Cax­ton or, more ac­cu­rately, Cax­ton CEO Terry Mool­man, had been try­ing for years to ex­tract from Naspers.

Pre­cise de­tails about who is be­hind the con­trol of Naspers have been shrouded in mys­tery since the com­pany listed in 1994. Back then the JSE tol­er­ated all sorts of con­trol struc­tures, so no-one was too con­cerned that it was only the 285m very low-vot­ing N shares that were listed (since in­creased to 398m). The bulk of the 712,000 high-vot­ing A shares, with 1,000 votes for ev­ery one vote of the N shares, were kept in pri­vate hands.

The two un­listed en­ti­ties in­volved in the con­trol struc­ture are Nas­bel, which owns 350,000 of the high-vot­ing A shares, and Keerom­straat, with 219,344 of the A shares.

A third en­tity was in­tro­duced into the struc­ture in 2005 fol­low­ing a bid by PSG’s

The merg­ing par­ties said the Naspers con­trol struc­ture had lit­tle bear­ing on the as­sess­ment of the com­pe­ti­tion im­pact of the merger

Jan­nie Mou­ton to get con­trol of Keerom­straat by buy­ing San­lam’s stake, equiv­a­lent to 13% of the Naspers A shares.

The two key play­ers in Naspers’s con­trol struc­ture — Koos Bekker, CEO at the time, and ex­ec­u­tive di­rec­tor Cobus Stof­berg — moved to block Mou­ton. They quickly cob­bled to­gether a new, more re­silient struc­ture that in­volved San­lam in­ject­ing its A shares into newly cre­ated Wheat­fields. Bekker and Stof­berg ac­quired a 50% hold­ing in Wheat­fields.

Fast-for­ward to mid-2014, when Me­dia24 told the com­pe­ti­tion com­mis­sion that it was a sub­sidiary of Naspers, a listed com­pany with an ar­ray of share­hold­ers, and as such was not con­trolled by any com­pany.

When the com­mis­sion pushed for more de­tail it was told that Nas­bel and Keerom­straat had a com­bined 50% of Naspers’s vot­ing rights and Wheat­fields an ad­di­tional 12%.

The merg­ing par­ties said the Naspers con­trol struc­ture had lit­tle bear­ing on the as­sess­ment of the com­pe­ti­tion im­pact of the merger. The com­mis­sion rec­om­mended un­con­di­tional ap­proval of the deal.

As was to be ex­pected, Cax­ton kicked up a fuss, ar­gu­ing that the deal was be­tween the largest pub­lish­ing com­pany and the largest print­ing com­pany in SA, and the own­er­ship struc­ture had to be in­ter­ro­gated more ef­fec­tively. It tabled doc­u­ments at the tri­bunal show­ing that Bekker, Stof­berg and San­lam ex­er­cised ul­ti­mate con­trol through a com­plex struc­ture. Cax­ton said the com­pe­ti­tion au­thor­i­ties were obliged to de­ter­mine what other print­ing, pub­lish­ing and me­dia in­ter­ests were held by Bekker, Stof­berg and San­lam.

At about this stage, the Me­dia24 team de­cided to aban­don the merger. A fu­ri­ous Retief called Mool­man a “vex­a­tious lit­i­gant” and said it was im­pos­si­ble to pro­ceed as “Cax- ton will be as dis­rup­tive as [it] can and will paral­yse us op­er­a­tionally for years to come, given the width and depth of the in­ter­ven­tions al­lowed by the tri­bunal”.

So an­other plan was hatched to deal with Retief’s wish to cash out. Novus would be listed. But just weeks away from the pro­posed list­ing in March 2015, Cax­ton reap­peared at the tri­bunal and at­tempted to in­ter­dict the list­ing on the grounds that it would re­sult in a change of con­trol. When the com­pe­ti­tion au­thor­i­ties dis­missed that move, Cax­ton went to the com­pe­ti­tion ap­peal court (CAC).

In Novem­ber 2015, eight months af­ter Novus was listed, the CAC ruled in Cax­ton’s favour, find­ing that the list­ing re­sulted in Me­dia24 hav­ing sole con­trol over Novus and Retief’s author­ity be­ing re­duced. So it was back to the com­pe­ti­tion com­mis­sion for Me­dia24 and Novus.

In April 2017 the com­mis­sion ap­proved the March 2015 list­ing, but ruled that Me­dia24 had to sell down its 66% stake in listed Novus to 19%.

The lat­est plan is for Me­dia24 to sell the “ex­cess” Novus stake to Naspers, which will dis­trib­ute it to its share­hold­ers. That plan will be sub­jected to an­other hear­ing at the tri­bunal, at which Cax­ton will be in­ter­ven­ing and no doubt push­ing for con­trol de­tails.

Mean­while Me­dia24 has got it­self caught up in an­other messy Novus-re­lated sit­u­a­tion. In early May it was forced to back­track on a Jan­uary state­ment that the death of Retief ( just hours ear­lier) trig­gered rights it had to ter­mi­nate the valu­able print­ing con­tract be­tween Novus and Me­dia24.

The Jan­uary an­nounce­ment came as a shock to or­di­nary share­hold­ers, given that there was ab­so­lutely no ref­er­ence to such an agree­ment ahead of the 2015 list­ing, and that about 25% of Novus’s rev­enue was de­pen­dent on it.

Charl Kocks of Ratings Afrika de­scribed the “over­sight” as “un­sound gov­er­nance of a breath­tak­ing na­ture” and called for sanc­tions against the re­spon­si­ble di­rec­tors.

Much of all of this may be the un­avoid­able con­se­quences of a large and pow­er­ful player, Naspers, try­ing to un­wind power-shar­ing agree­ments in an en­vi­ron­ment that al­lows much more scru­tiny. How­ever ir­ri­tat­ing, and what­ever the agenda of the var­i­ous scru­ti­neers, on bal­ance the pub­lic should be bet­ter off.

Naspers and Me­dia24 need to learn to deal more ef­fec­tively with the new en­vi­ron­ment, with its lurk­ing vex­a­tious litigants, and avoid spec­tac­u­lar own-goals such as the an­nounce­ment that it was ter­mi­nat­ing the Novus print agree­ment.

In time, per­haps, Novus will be able to just get on with what it is good at — print­ing.

Pic­ture: iStock

Novus, for­merly Paarl Me­dia, has a great rep­u­ta­tion as a print­ing com­pany

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