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