Moolman orchestrates ElementOne offer
ELUSIVE media magnate Terry Moolman is the central figure behind the R2.3-billion offer for ElementOne — not billionaire Johann Rupert.
Speaking at Caxton’s AGM on Friday morning, chairman Paul Jenkins put paid to speculation that the offer by the BidCo consortium for ElementOne — which controls about 39% of the shares of the R12-billion Caxton & CTP Publishers and Printers — was Rupert’s entry into the media sector.
The speculation arose because BidCo is controlled by Moolman, Rupert company Remgro and Rand Merchant Bank.
“The company is still firmly under the control of Mr Moolman at the top,” said Jenkins.
“BidCo will entrench his control, not pass it to Johann Rupert and Remgro. This deal sees the end of the dead hand on the tiller.”
ElementOne’s major shareholders include Allan Gray, Coronation Fund Managers and Tantalum Capital.
The comments echo statements made by Rupert at Remgro’s AGM earlier in the week. He said Remgro was not interested in print media.
“Remgro was appointed to assist in unlocking value. There were a few people who thought they could rattle Mr Moolman’s cage. But they were stuck and wanted to get out,” he was reported as saying.
ElementOne was created by the breakup of Johnnic Communications — which included what is now Times Media Group, the owner of this newspaper — and holds 80 million direct shares in Caxton and a further 86 mil- lion via Afmed and other holdings. ElementOne was forced to delist in 2010, and has since become a value trap, with its shares trading over the counter at a substantial discount to the value of the underlying Caxton shares.
If BidCo succeeds in buying ElementOne, which looks likely, it could simplify this structure in one fell swoop.
Adrian Zetler, equity analyst at Coronation, said he expected the deal to lead to a restructuring of the whole group — but he could not speculate about how it would look afterwards.
“We think the offer is fair and are in support of the deal,” he said.
“The ElementOne shares were trading at a discount … but one must take into consideration the complex holding company structure, potential taxes inherent in the structure and other costs.
“When considering all these factors, we came to the conclusion that the offer was fair. Furthermore, you have the option of receiving a large part of your consideration in Caxton shares and are therefore still able to share in any future upside in the Caxton shares.”
Avior Research director and analyst Kevin Mattison said the discount was a result of trading over the counter as well as a lack of security that dividends from Caxton would get passed on to ElementOne shareholders.
They were not reaping the full value from the underlying Caxton holding, but its complicated structure kept most potential suitors at bay.
The company had been planning an in specie special dividend payment to shareholders but reversed that decision when Moolman, RMB and Remgro came to the table with an offer at a premium to the discounted valuation.
Remgro will take a passive role in the deal. “We are not contemplating any board seats,” Rupert said.
As long as Moolman retains such tight control of Caxton, he looks set to resist pressure from fund managers like Allan Gray and Coronation to strip assets — unlike Johnnic, which succumbed to pressure and sold prize assets to its major competitor.
In this case, the fund managers will be pleased they will be able to swap ElementOne shares for Caxton shares.
At Friday’s AGM shareholder activist Theo Botha was looking to deal with what he believed was the downside of de facto control by Moolman, just days after Assore chairman Desmond Sacco had given his “I am the godfather” speech at Assore’s AGM.
Moolman’s steady presence has been reassuring in an increasingly difficult print media environment. Caxton’s Turnover grew to nearly R6-billion in the last year and profit before tax was R686-million — thanks largely to its wide range of lucrative community newspaper titles.
But Botha pointed out that remuneration policy had not been tabled and that the policy for director remuneration was unacceptably vague.
“Today’s business does not include a resolution where shareholders approve the company’s remuneration policy in a non-binding advisory vote as required by its corporate governance register and in terms of the King 3 Report on corporate governance, as required by JSE listing requirements,” he said, in an unsuccessful attempt to bring the AGM to a close until the issue had been rectified.
“In fact, nowhere in this 2013 annual report does it reflect the company’s remuneration policy.”
Botha accused the board of running a reputational risk.
“There’s no rationale given, no key performance indicators,” he said.
But Andre Visser, general of issuer relations at the JSE, said approval of the company’s remuneration policy is not a JSE requirement.
“I can confirm that principle 2.27 of King 3 contains certain recommendations in this regard, but King 3 is incorporated into the listings requirements on an ‘apply or explain’ basis, which means this principle is not mandatory and companies can elect to explain why they have not adopted [it].
“Separate from the above, the Companies Act requires shareholders’ approval by special resolution for directors’ fees,” Visser said.