More than a back door to Cax­ton

Finweek English Edition - - COMPANIES & MARKETS - MARC HASENFUSS

UN­LISTED IN­VEST­MENT com­pany El­e­ment One holds as its sole as­set – other than cash – a 39,8% (di­rect and in­di­rect) stake in me­dia group Cax­ton. El­e­ment’s hold­ing in Cax­ton trans­lates to around 1921c/share – con­sid­er­ably higher than the top bid on the over-the-counter mar­ket of 1710c. Okay, so there’s value to be had. How­ever, Finweek reck­ons there’s a bit more to El­e­ment One than sim­ply be­ing seen as a “cheap” back­door en­try into Cax­ton.

El­e­ment – guided by the as­tute Danie Vlok – has been em­broiled in pro­longed legal spats with Cax­ton in an at­tempt to de­ter­mine what con­trac­tual obli­ga­tions were tagged to the shares it owned (di­rectly and in­di­rectly) in Cax­ton. The nub of the mat­ter is whether El­e­ment is al­lowed to sell the shares to a party of its choice or whether there are re­stric­tions on sell­ing those shares.

While a re­cent judg­ment ruled no re­stric­tions were ap­pli­ca­ble to El­e­ment’s Cax­ton shares, the court also granted Cax­ton Ltd – the con­trol­ling share­holder of Cax­ton – a 30-day right of re­fusal over the shares held by El­e­ment. El­e­ment, ob­vi­ously ap­peal­ing that judg­ment, has since un­cov­ered doc­u­ments that “strongly sug­gest” it may have sub­stan­tive rights of pre-emp­tion over the shares held by the con­trol­ling share­hold­ers of Cax­ton – in­clud­ing the right to ac­quire con­trol of Cax­ton on the deaths of prime movers Terry Mool­man and Noel Coburn.

Per­haps – more sig­nif­i­cantly over the short term – the doc­u­ments also sug­gest El­e­ment is en­ti­tled to board rep­re­sen­ta­tion on Cax­ton.

El­e­ment has gone out of its way to dis­miss no­tions its ac­tions shouldn’t be con­strued as a tilt to break up Cax­ton or de­stroy the cur­rent con­trol struc­ture – stress­ing the need to be able to place a re­al­is­tic value on its in­vest­ment. Re­al­is­tic is per­haps the op­er­a­tive word. If El­e­ment is free to en­ter­tain of­fers for what con­sti­tutes an in­flu­en­tial stake in one of SA’s me­dia gi­ants the bid could well be well above the value re­flected on the bal­ance sheet.

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