Sex­ier cash-spin­ners

Will new-look com­pany covet more me­dia as­sets?

Finweek English Edition - - Companies & Markets - MARC HASEN­FUSS march@fin­week.co.za

WILL IN­VEST­MENT GI­ANT Rem­gro – af­ter its pro­posed “merger” with cor­po­rate cousin Ven­Fin – have am­bi­tions to grow its in­flu­ence in the me­dia sec­tor? The pro­posed merger of Rem­gro and Ven­Fin largely brings to­gether old econ­omy in­vest­ments (food, liquor, bank­ing, min­ing, etc) with new tech­nol­ogy as­sets (in­for­ma­tion tech­nol­ogy, me­dia and telecom­mu­ni­ca­tions).

There’s hardly any over­lap in the re­spec­tive port­fo­lios of Rem­gro and Ven­Fin, ex­cept in the area of me­dia, where both com­pa­nies hold fairly sub­stan­tial in­vest­ments. Ven­Fin holds a ma­jor stake in Sabido, which is the con­trol­ling share­holder of free-to-air tele­vi­sion broad­caster e.tv.

Rem­gro holds a ma­jor stake in Kag­iso Trust In­vest­ments, which in turn con­trols ra­dio and pub­lish­ing group Kag­iso Me­dia. That means Rem­gro will have sig­nif­i­cant in­flu­ence in the elec­tronic me­dia seg­ment, hold­ing two highly re­garded as­sets that have tra­di­tion­ally been strong cash spin­ners.

Pre­sum­ably Rem­gro’s me­dia am­bi­tions will be re­stricted to the “sex­ier” elec­tronic me­dia and that for­ays into print and

pub­lish­ing will be most un­likely. Per­haps sig­nif­i­cantly, Rem­gro’s small stake in Cax­ton (a throw­back to the days of Per­skor) no longer fea­tures in the group’s list of in­vest­ments.

Ven­Fin does bring Rem­gro a foothold in spe­cial­ist me­dia in the form of One Dig­i­tal Me­dia (ODM) – a net­work of dig­i­tal me­dia for re­tail in SA. ODM al­lows brand own­ers and re­tail­ers to dis­play con­tent via broad­cast or nar­row­cast to mul­ti­ple en­vi­ron­ments or sin­gle LCD screens.

ODM only started op­er­a­tions in Fe­bru­ary 2007 and to date Ven­Fin has in­vested more than R50m into it to help it ex­pand its foot­print, which in­cludes deals with con­ve­nience store gi­ant Spar. No doubt ODM should ben­e­fit from the 2010 Soc­cer World Cup by plac­ing LCD screens in tav­erns, restau­rants and bars.

In­ter­est­ingly, Ven­Fin also owns Fyn­bos Me­dia – a small empowerment com­pany hold­ing around 8m shares in the Phuthuma Nathi empowerment ve­hi­cles (which in turn holds eq­uity stakes in Naspers-con­trolled Mul­ti­Choice Africa).

But it’s not only SA as­sets that Ven­Fin brings to Rem­gro’s ta­ble. The group also holds a sig­nif­i­cant mi­nor­ity stake in Nas­daq-listed mo­bile ad­ver­tis­ing spe­cial­ist Vi­sion China Me­dia (VCM). Cur­rently, VCM doesn’t add up to much, with its value markedly lower at R174m in Ven­Fin’s in­terim fig­ures to end-De­cem­ber 2008 as the com­pany’s price has dipped from a high of around $25 to the cur­rent $5,50/share.

How­ever, VCM’s share price might be­lie the po­ten­tial of the busi­ness, with its first quar­ter 2009 re­sults show­ing a 100% jump in rev­enue to $27,3m. Gross profit in the first quar­ter was a solid $13,3m – up more than 80% from $7,2m in first quar­ter 2008.

Col­lec­tively, the com­bined me­dia as­sets will be worth less than R2bn, which – mea­sured against Rem­gro’s sprawl­ing port­fo­lio – is fairly mi­nus­cule. But if the Rem­gro/ Ven­Fin merger gets the thumbs-up from share­hold­ers it will be in­ter­est­ing to see how Rem­gro re­or­gan­ises its in­vest­ments – which cur­rently are housed un­der “In­dus­trial”, “Fi­nan­cial”, “Min­ing” and “Other” (com­pris­ing the 21% stake in Busi­ness Part­ners and 44% stake in Xi­a­com).

Will new-look Rem­gro sim­ply bracket most of Ven­Fin un­der a new in­vest­ment head­ing such as “Tech­nol­ogy”? If a spe­cific “Me­dia” divi­sion is cre­ated in Rem­gro, then it may sig­nal some se­ri­ous in­tent to build a new medium…

Pen­chant for me­dia as­sets? Jo­hann Ru­pert

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