Fuzzy picture

Value is not exactly in the eye of the beholder with E Media Holdings. But don’t switch off

The JSE has drastically reduced enticing arbitrage opportunities by precluding and frowning on listings of pyramid holding companies and low-voting N-share structures.

There would, I suspect, be much interest from opportunistic traders in broadcast specialist E Media Holdings. At the time of writing, E Media (which owns free-to-air e.tv, news channel eNCA and multichannel satellite platform OpenView HD) showed a baffling differential between the price of its ordinary shares and its N-shares. The ords were bid 842c and offered 930c, while the N-shares were bid 409c and offered 499c.

The (relative) valuation issue I will debate later. The problem, at the outset, is that both classes of shares are hopelessly illiquid, with Hosken Consolidated Investments speaking for 78.9% of the ords and 87.9% of the Nshares. With no disputing who the controlling shareholder is at E Media, why persist with this structure? Perhaps the N-share structure will be dismantled if (rather than when?) another investment giant, Remgro (which owns 32% of unlisted E Media Investments, the old Sabido) swaps its shareholding into listed E Media Holdings.

This exercise will be fascinating in terms of valuations. Would Remgro swap out its stake at the price of E Media Holdings’ ordinary shares or its N-shares? Or would HCI and Remgro calculate out a swap price based on prospects, discounted cash flow and other strategic considerations?

The real value of E Media Holdings is tough to fathom. Since the old Seardel listing — which recently took the E Media guise — was re-constituted as a media play, there has been a consistent crimping of value. When Seardel/E Media unbundled its industrial assets into Deneb in November 2014, the