Whoever wins in the bid for the New Africa Investments Limited (Nail) assets, consolidation of the media sector looks imminent.
Many of the known contenders for the prize — which includes a controlling stake in Western Cape radio station Kfm (66,5%), equity stakes in Gauteng stations Jacaranda (42,5%) and Kaya FM (24,9%), almost all of the Sowetan daily newspaper and half of the weekly Sowetan Sunday World — are already top-tier media players.
A bid from a consortium led by the Tiso Private Equity Fund counts Primedia’s joint controlling shareholder Mineworkers Investment Company (MIC) in its ranks. Also in this group are Investec Bank and current Nail chief executive Saki Macozoma’s Safika Holdings. Despite Macozoma’s poor record since taking the reins, more than half of Nail’s shareholders support the Tiso consortium offer.
Macozoma leads a charmed life. In 2001, after he had quit as Transnet managing director, Minister of Public Enterprises Jeff Radebe attacked him in Parliament for his dubious negotiation of former SAA chief Coleman Andrews’s salary package. But he fought back, deflecting the blame for Andrews’s R232-million contract termination payout on to Radebe and Transnet executives.
Macozoma’s tenure at Nail has seen him use similar devices to explain the group’s failures. In The Media magazine’s April issue, he cited the unjust entry of the Daily Sun into the newspaper market as the reason for the Sowetan‘s loss of 80 000 buyers. “This is uncompetitive behaviour by Naspers,” he said of the R1 cover price set by the Daily Sun‘s owners. “You can’t use profits generated by one product to sustain another product which is designed to affect a competitor.”
Macozoma may have a genius for emerging unscathed, but if the Tiso consortium wins the bid, it will either have to address the Sowetan’s positioning and distribution problems, or do as expected and sell the asset off to Johncom.
As the Sunday Times reported on August 3, the consortium is expected to bank the cash from the Nail assets. Johncom, owners of the Sunday Times, Business Day,/i> and Financial Mail,/i>, would be the logical choice for an acquisition of the newspapers, and might even consider the prospect of revitalising Nail’s floundering Leadership magazine.
While rumours of Primedia’s own bid are unconfirmed, this group, which already owns 94.7 Highveld Stereo, 702 Talk Radio and 567 Cape Talk, should be more than willing to take radio brand Kfm off a triumphant Tiso consortium’s hands.
Under managing director Felicia Roman, the Cape station has rocketed to more than one million listeners according to the latest RAMS survey results, and in terms of year-on-year advertising revenue growth, is one of the top three regional radio stations in the country.
Besides delivering CEO William Kirsh his long-held dream of matching Primedia’s AM and FM licences in Gauteng with the double in the Western Cape (these regional limits are set by the regulator), the MIC connection would render the scenario a practical fait accompli.
The MIC would also be a reasonable bet for securing Primedia the Nail Outdoor assets, an acquisition that would put Primedia Outdoor in a healthy position to challenge Clear Channel Independent for the number one position in the sector.
Kagiso Media, joint shareholders with Nail (at 42,5%) in Jacaranda, would probably look to increase its stake in South Africa’s largest regional radio station. Although the group had concluded a deal to sell all assets to Nail in 2001 — a move blocked by the regulator — chief executive Roger Jardine told Media Weekly Kagiso intends to remain in media.
This could mean that Kagiso would also consider upping its equity in radio sales house Radmark (31,7% owned by Nail) if the Tiso consortium’s bid wins out. Further evidence of Kagiso’s interest emerges from strong rumours that it is bidding against the Tiso faction in a consortium that includes Johncom and Caxton.
The only other confirmed bidder at present is e.tv’s controlling shareholder Hosken Consolidated Investments (HCI). Given HCI’s statement after the sale of its 5% Vodacom stake for R1,5-billion that the cash would be used to fund e.tv on a fast-tracked timeline to profitability, the offer for Nail came as a shock.
But it looks certain that when a claw-back offer to minorities lapses following HCI’s proposed delisting, Rupert family group Venfin will own 33%, which should answer questions about funding.
After the winning bidder is announced, which could take months, it will be up to the Independent Communications Authority of South Africa (Icasa) to give the go-ahead.
The regulator has its own concerns, and, as evidenced by its reasons for blocking the Nail-Kagiso merger — it felt that Nail, at a 5% empowerment quotient, would dilute overall empowerment by acquiring Kagiso. It will not act in the interests of consolidation alone.
“We want to see the industry thriving and being boosted,” Icasa chairperson Mandla Langa has said. “But there is also the imperative of empowerment and of ensuring diversity of voice.”
Media Weekly is produced for the Mail & Guardian by The Media magazine , and is edited by The Media’s editor Kevin Bloom.