New Africa Investments Limited (Nail) should sell off its media interests and use the proceeds, together with its stockpile of R639-million, to pay off its shareholders.
This is the view of John Slettevold, media analyst at UBS Warburg.
Slettevold spoke to the Mail & Guardian as Nail CEO Saki Macozoma was preparing to meet his board on Friday to chart a way forward.
“Listening to [Macozoma], he appears to feel that they have explored their options and reached the end of the road,” Slettevold said.
Concerns that are raised about Nail centre on economic performance. The investment holding company has consistently traded at a discount to its net asset value (NAV) — its assets less liabilities.
Slettevold estimates Nail’s NAV to be about R10 a share but the share price has performed well below these levels, having already hit a low of R4,80 in the past year and currently hovering at around the R6,20 mark.
Macozoma described Nail’s latest financial results as “gratifying”, but conceded that “a new strategy had to be found to unlock shareholder value”.
Nail has media interests in publishing, outdoor advertising, radio and television as well as a collection of miscellaneous assets including a 60% holding in car-hire group Hertz, a 5,2% stake in New Africa Capital and other financial services. It owns the mass-circulation daily Sowetan and half of Sowetan Sunday World. It also has an interest in Jacaranda 94.2 FM, KFM in the Western Cape and Kaya FM in Johannesburg.
At the end of last year, contribution to headline earnings from media
assets rose 61% from R16-million to R26-million. The contribution from radio rose from R14-million to R19-million. But headline earnings per share represented a loss of 18,7c a share.
In its five-year review from 1997 to 2001, Nail saw its headline earnings per share decline from R5,38 a share to R1,79 a share.
During this period, the group unbundled its financial services interests, starting with African Merchant Bank and African Bank Investment Limited in March 2000, and then partially unbundling Metropolitan in September 2001.
“Nail has not been what it promised,” Slettevold says, but adds that it has not been through want of trying by Macozoma.
He singles out a crucial moment in Nail’s decline as being when the Independent Communications Authority of South Africa (Icasa) vetoed its
attempted purchase of Kagiso for R377-million.
“If that deal had gone ahead, things would have been different now,” says Slettevold.
In an interview with The Media, Macozoma fired a renewed broadside at Icasa’s decision, describing it as “inexplicable” and based on “reasoning flimsy to the point of being judicially reviewable”.
With Nail’s attempts to develop electronic media frustrated, Macozoma attempted to grow the company through print — most notably with the attempt to purchase Johncom, Johnnic’s media and entertainment division.
As it turns out the media giant’s sale price was more than Nail was willing to pay but Macozoma believes that had the deal gone through, it would have been a “good fit”.
The purchase of Johncom would have brought ownership of printing presses, while back office synergies would have meant better use of management and support staff, and complementary titles would have bolstered Nail’s position in the
middle to upper market.
“To get better than this is not possible. It’s tragic that it has not happened,” he says in his interview with The Media.
Macozoma says that there are no realistically priced print media assets in the country, a situation that is leaving Nail with little room to manoeuvre.
There has been market talk that a recently withdrawn cautionary issued by Nail last October did not relate to the Johncom deal, but was a means to provide the opportunity for Safika to buy Nail with a view to delisting it.
Macozoma is deputy chairperson of Safika, which leads the Phaphama consortium, which has a controlling vote in Nail.
The deal is said to have been rejected by the board, and Macozoma told Business Times that there were never intentions to delist, but did not comment on the sale.
This week, David Barritt, spokesperson for both Nail and Safika, said the companies were bound by cautionary confidentiality and could not comment.
There has also been talk that Nail is considering branching into other
sectors — possibly mining or financial services — and last week Macozoma increased his stake in Safika.
When asked where he expected Safika to derive growth from, Barritt said the company was in talks on a number of deals but refused to elaborate and said an announcement would be made shortly.
Safika will have a 29% stake in the newly formed investment banking outfit Andisa, which Macozoma will chair.
If, or perhaps when, Nail bows out of the JSE Securities Exchange, it would be justifiable to debate whether it was really an empowerment company. The issue was
already raised by Icasa when it blocked the Kagiso deal.
Chia Chao Wu, deputy CEO of empowerment research and rating agency Empowerdex, says he classifies Nail as an empowered company because it has more than 25% black ownership and control.
“The loss of Nail would be a setback, not economically, but politically,” he says.
Phaphama holds 1,9% of Nail and according to Nail’s financial statement it has a 52% vote. The balance is held by a range of major institutions.