Alec Hogg
Boardroom talk
AME is set for better days. The JSE-listed penny stock owns 15% of the new undisputed World Heavyweight Boxing Champion and the right to promote his first title defence.
A $250 000 punt on American heavyweight boxer Hasim Rahman turned to gold early on Sunday for African Media Entertainment (AME). In one of the sport’s biggest shocks, Rahman knocked out champion Lennox Lewis in the fifth round of their fight at Carnival City Casino near Johannesburg. Three versions of the heavyweight world title were at stake, making the winner the undisputed king of the ring.
Despite being the younger man and with an excellent record (two losses in 36 fights), such is Lennox’s reputation that Rahman was regarded as a no-hoper. Bookmakers offered punters 10-1 on the unlikely event of a Rahman victory astonishing odds in a two-person contest.
Though the details remain sketchy for now, AME executives at the fight said the company’s wholly owned subsidiary Golden Gloves has a half share in the consortium that owns 30% of Rahman’s future earnings stream. It also has the right to promote the new champion’s first title defence.
The result is a personal triumph for Golden Gloves’ principal Rodney Berman, who left no doubt about his loyalties by making a gesture of prayer before embracing Rahman when the boxer entered the ring. Considering Berman’s substantial holding of AME shares acquired when he sold Golden Gloves into the then rapidly expanding operation three years ago, few could blame him for requesting divine intervention. After peaking at 188c in May 1998, AME stock has headed south with the shares available in the open market at 3c at the end of last week.
Even before the main event the night was proving a success for the AME subsidiary. In the main preliminary match South Africa’s Lehlohonolo Ledwaba defended his world junior featherweight title. Golden Gloves has a similar deal with Ledwaba to the one with Rahman. But in earnings terms, that’s where the comparison ends it’s in the heavyweight division that the real money lies.
Insiders say AME’s earnings from promo-ting Rahman’s next fight should be enough to wipe out the R15-million debt it entered in January. This was the result of the recapitalisation of the company by a consortium led by investment bank Brait and empowerment group Worldwide Africa Investments. Golden Gloves was key in this deal because 75% of the shares in the business were lodged as security for the debt.
Hard currency cash flows for AME will be huge should Rahman prove to be more than a one-hit wonder, which on the strength of his comprehensive victory over the sport’s dominant personality is possible. The budget for Sunday morning’s event was R220-million, with minimal risk for AME because the bulk of the expenses had been covered beforehand through the sale of television rights, primarily to the United States.
After flirting with bankruptcy for much of the past two years, January’s capital injection together with the disposal of loss-makers Punt Radio and Ticket-Web secured a long-term future for AME. Since the disposals the company has been trading profitably at an operating level.
Partly because of the continued aversion for small cap stocks, investors have been slow to pick up on the improved prospects. That is likely to change once the market begins to appreciate the impact of the Rahman victory.
It was also the perfect welcome-aboard gift for former Honeywell SA boss Nick Buick, who took over as AME’s CEO last week. Buick replaces turnaround specialist John Rennison. Both were on hand to see Rahman’s triumph on Sunday morning, as were new AME shareholders, furniture magnates Sid and Eric Ellerine, who are members of the Brait-led consortium.