While Naspers executives have been at the ramparts fending off a hostile bid, chief executive Koos Bekker has struck a deal with Sanlam, making him a controlling force in the R40-billion giant for an investment of just R67,5-million.
Bekker recently sold R75-million of Naspers shares to pay Sanlam for a 25% stake in Wheatfields, a new entity that owns high-voting Naspers A shares, both directly and through Keeromstraat and Nasbel, which jointly hold 55% of Naspers’s voting rights.
Naspers A shares have 1 000 times the voting power of ordinary shares. Naspers’s structure, its executives acknowledge, is designed to keep control in the hands of its directors.
Bekker’s joint control of Wheatfields, plus his directorships in key controlling entities Naspers, Nasbel and Keeromstraat, is seen as giving him effective control of the group.
He is also probably the largest individual shareholder, with matured shares and options reportedly worth about R1-billion.
Sanlam now owns 50% of Wheatfields, the other 25% having been bought for R67,5-million by Cobus Stofberg, a senior executive within the Naspers group. Wheatfields owns 133 000 A shares plus 168 000 Keeromstraat and 16-million Nasbel shares. It has 13% of Naspers’s vote.
Naspers’s South African interests include monopolies in pay television (M-Net and DStv) and Afrikaans newspapers, with extensive magazine and other print interests including The Witness, Daily Sun and City Press. It also owns M-Web, a dominant player in the South African Internet market.
Listed in Johannesburg and New York, Naspers operates in numerous countries, including the United States, China, Thailand, Greece and Cyprus.
Its control structure has been in the news following a bid for Keeromstraat shares by a consortium led by PSG’s Jannie Mouton.
Prior to Mouton’s bid, the A shares were considered to be for control purposes only and to be of nominal value.
Mouton offered to buy Keeromstraat shares at 50c each, the equivalent of R127 for each Naspers A share.
But Bekker has incurred the wrath of Keeromstraat shareholders, says journalist and analyst Deon Basson: ‘Bekker has now alienated the shareholders of Keeromstraat. Until recently, shareholders were made to believe that … the Naspers A shares held by Keeromstraat were virtually worthless and held for control purposes only.
‘Now suddenly and rather expediently Bekker pays R1 063,71 per A share — a hefty 8,5 times more than the value of N shares.”
Bekker’s deal, notes Basson, is not with Keeromstraat shareholders who may want to cash in on the newly unlocked value, but Sanlam, which profits by R100-million from the deal.
Bekker sold just less than 600 000 Naspers N shares on Monday for R125 each. In terms of a five-year contract begun in October 2002, Bekker receives no salary or income but benefits from Naspers shares allocated to him.
Based on a Securities Exchange Commission filing, Basson estimates the present value of Bekker’s shares at R483-million.
Ann Crotty, writing in Business Report, calculates the value of Bekker’s Naspers shares, after Monday’s sale, at about R1-billion, the difference probably being what has matured in the former versus matured plus yet-to-mature options in the latter.
Asked what the value of his shares in Naspers are worth, Bekker responded: ‘Each year all shares I have an interest in are set out in the annual report. Some shares have vested and some not. The calculation will take some time, because the various tranches of shares were issued at the then market price plus an expected inflation factor, and the asset is really the profit between that cost and the present market price.”
A further quirk in the control structure is that none of Keeromstraat’s 3 200 shareholders get more than 50 votes. This includes Wheatfields.
Bekker’s Wheatfields deal is designed to keep control in ‘friendly” hands, but it appears that takeover battles at the media giant are not over.
Mouton has withdrawn his offer of R127 for A shares held by Keeromstraat shareholders, but PSG is understood to have secured enough Keeromstraat proxies to be able to call a special general meeting.
‘Such a meeting may turn into a referendum to determine Bekker’s popularity and he is more than likely to lose control of the Keeromstraat board and lose the voting rights of that company in Naspers,” says Basson.
Naspers’s two-tier share structure was originally intended to make the company takeover-proof.
Naspers directors valued the A shares for the year ending March 2005 at R2,55.
No way, says Koos
Koos Bekker responds: Wheatfields plays no role at all in the control structure of Naspers. Since the new dispensation in 1995, the group has been jointly controlled by two companies: Nasbel and Keerom, which own most high-voting A shares and jointly vote 56% in Naspers. They also have a voting pool and pre-emptives between them.
Wheatfields is simply a vehicle Sanlam set up to hold its A shares (which only vote 13% and do not form part of the control block).
Sanlam wanted to cash out partially and thus sold 50% of this — 25% each to Cobus Stofberg and myself. Apart from the fact that Wheatfields itself controls nothing, Sanlam can veto all decisions in that company and all votes of that company.
The reason why Cobus Stofberg and I were prepared to buy into the Sanlam Wheatfields vehicle is that Sanlam wanted to sell and we did not want to see that stake sold to a raider.
If the latter bought it, he could not control Naspers that way, but could cause mischief by trying, for example, to block special resolutions (for which companies need 75% approval of those present and voting). Did we pay too much? Probably.
Local is lekker
Naspers executives defend the company’s apparently archaic control structure — originally designed to protect a pro-Afrikaans or even pro-nationalist agenda — by pointing to any number of media companies internationally that have dual voting structures.
This includes Rupert Murdoch’s News International and Google.
Media companies are distinctly different, says executive director Steve Pacak. ‘Our control structure is not at all archaic. A media company is distinctly different. Independence is critical for a media company.”
Asked why the DStv offering, where subscribers are unable to choose channels of their choice, includes just one local content programme, the Afrikaans channel KykNET, Pacak said the ‘main logic is commercial”.
The only local-content channel of the 11 official languages, KykNET is a jewel in DStv’s offering. It is an advertising revenue-spinner and makes a significant contribution to the local television production industry. Forty percent of KykNET’s viewers are English-speaking.
M-Net CE Glen Marques says 90% of KykNET’s material is locally produced at a cost of R80-million to R90-million annually. M-Net’s total local production costs are R300-million a year.
‘Costs are incredibly high, that’s why you haven’t seen the emergence of other local channels. Even the SABC uses more foreign material because it is a lot cheaper.”
Marques described KykNET as a good channel that attracted top advertising and was ‘strategically important to us”.