Behind the Johncom bid

Johnnic Communications (Johncom) chair Mashudu Ramano has emerged as a key behind-the-scenes supporter of the multibillion-rand takover bid by people connected to President Thabo Mbeki.

The bid has provoked a storm of protest over its implications for media independence. Johncom owns the Sunday Times, Sowetan, Daily Dispatch and half of the Financial Mail and Business Day.

The alleged support for the bid by the Public Investment Corporation (PIC) is equally controversial.

Sources inside Johncom or with knowledge of the manoeuvring around the deal say Ramano was approached a month ago with an offer by Koni Media Holdings and dealt with its principals ‘behind the back” of his own board and executive.

One source claims Ramano then asked chief executive Prakash Desai to present the bid to the board. Desai, sceptical of Koni’s political make-up, consulted senior managers at Johncom.

This appears to have triggered the leak to the Sunday Times, which splashed the news across its front page last week. The newspaper has been locked in battle with authorities, led by the presidency, since it ran a series of exposés on Health Minister Manto Tshabalala-Msimang.

Ramano did not return calls from the Mail & Guardian.

Koni is co-owned by advertising executive Groovin Nchabeleng, presidential adviser Titus Mafolo, foreign affairs spokesperson Ronnie Mamoepa and former chief of state protocol Billy Modise.

The Sunday Times said Koni’s bid came in at R7-billion. The M&G understands, though, that soon after this informal offer was made, roughly a month ago, it was reduced to about R5-billion.

The offer would be to buy 100% of Avusa, which is to be unbundled from Johncom by early next year. Koni would then own the group’s directly owned media and entertainment assets. These include the newspaper, magazine titles and Nu Metro.

It is understood that Koni’s offers to date have been conditional. A binding offer was to have been made during the past week, but this appears not to have happened, perhaps because of the publicity.

Tokyo Sexwale’s Mvelaphanda Group announced late last month that it had reached agreement with Allan Gray, a large institutional investor in Johncom, to buy from it 25% to 30% in Avusa once it is unbundled. The Mvela transaction values Avusa at about R4,7-billion — meaning Koni’s R5-billion comes at a premium.

PIC’s alleged support for Koni has elicited strong criticism, the question being whether it is proper to risk state pensioners’ money on a deal that appears more politically motivated than commercial.

PIC chief executive Brian Molefe said on Tuesday: ‘We have not done a deal with Koni.” He declined to comment further.

Critics say Molefe did reach a deal with Koni ‘in principle”, at least to underwrite commercial capital raised by it. His denial, in other words, might have been technically correct, but sidestepped the issue of state support for politically connected players.

If the PIC were to fund or underwrite the Koni transaction, it would not be without precedent. Both the PIC and another state investor, the Industrial Development Corporation (IDC), have in the past funded the acquisition of media institutions for what appeared to be a mixture of ideological and empowerment reasons and not strictly commercial ones.

SABC executive Pearl Luthuli-Mashabela’s media ventures, most notably the magazines De Kat and Tribute, were funded by both the PIC and IDC, but went belly-up. When her Nothemba Media, which owned Tribute, was liquidated in 2003, it reportedly owed the two state institutions about R28-million.

In 2005 the PIC, also under Molefe’s leadership, warehoused Telkom shares worth R9-billion in the same controversial deal that placed a significant part of the phone operator’s equity in the hands of the Elephant Consortium.

Elephant included politicians and politically connected players, such as ANC presidency head Smuts Ngonyama, former communications director general Andile Ngcaba, Wiphold chief executive Gloria Serobe and SABC chief executive Dali Mpofu. PIC retains 5% of Telkom. Industry insiders had divergent views this week on Koni’s chances for success.

One said: ‘Do they [Koni Media] think they’re in the game? Absolutely, they’re serious — they think they are.” But, he said, he could not find ‘anyone serious taking it seriously”. The deal did not make sense — it was a bid for Johncom’s media assets that had yet to be unbundled into Avusa and it was not a simple matter to acquire assets in a listed entity.

Nchabeleng, Koni’s chief executive, maintained, though, that a ‘firm offer will be made” within a week or two.

Coronation Fund Manager, which owns 15% of Johncom and is the second-largest shareholder, this week indicated an interest in selling its shares at the ‘right” price. Gavin Joubert, a portfolio manager at Coronation, told Business Report the company ‘did not care about the politics” surrounding Koni Media’s bid. Coronation’s objectives were ‘to maximise value for clients”.

Old Mutual echoed this, saying it would sell its 6% at the right price.

But the big question remains whether Koni will be able to raise R5-billion. The company is said to have at least spoken to Old Mutual and Rand Merchant Bank, but to have received the cold shoulder from the former and not to have had success yet with the latter.

Mvelaphanda has not commented publicly on the Koni bid, but a source in the Sexwale camp said: ‘[Johncom] is a public asset. Until a formal offer is received, we’re not taking it seriously.”

There was speculation this week that Mvela might attempt to raise its 30% stake so as to head off Koni’s bid, but it is understood this is unlikely, as the 34,9% threshold triggers a mandatory offer to minorities. Full ownership appears to be beyond Mvela’s game plan. Koni Media was founded in June last year. According to the company’s share register Nchabeleng owns 70% of the shares, with the remaining 30% divided between Mafolo, Mamoepa and Modise.

Mafolo and Mamoepa’s other interests include their shareholding in aviation company Aerosud, which has benefited substantially from the arms deal, as well as having current and former links with controversial security company Sondolo IT, which is being investigated for fraud following the awarding of a massive security contract by the department of correctional services.

The Johncom board appears to be strongly divided over the Koni bid, with Ramano and Desai the chief antagonists. Non-executive director Dennis Mashabela, who is thought to be close to Ramano, argued in this week’s Financial Mail for the ‘highest censure possible” of whoever leaked the information to the Sunday Times.

‘[T]here is no justification for any senior company employee to disclose confidential information before the board has even seen or deliberated over it,” Mashabela wrote.

‘I’ll stake my pants on vested interests seeking to influence board outcomes in particular directions as the cause of this and previous leaks of confidential company information.”

He called on editorial to ‘butt out of management and board responsibilities” — a statement ‘for which [he] will certainly be censured”. Mashabela also criticised those questioning the validity of Koni Media’s bid.

‘Now, unless a prospective buyer is a proven crackpot or meddlesome dictator, how are we to decide who has ‘good hands’ for media ownership? Is there a moral standard or some other benchmark? Is it race, political viewpoint or how chummy the prospective buyer is with editorial staffers?” he asked.