Predators eye local press giant
Buyers are circling around pillars of South African media such as The Star, the Cape Argus, The Mercury and The Sunday Independent.
The financial plight of the overseas parent of these newspapers, the Independent News and Media (INM) group, has sparked a flurry of interest in the company’s South African assets.
Local media giant Avusa, which publishes The Sunday Times, and businessman Moeletsi Mbeki, are among those putting out feelers.
INM has been in trouble for some time. The company recorded a loss of €159,4-million last year.
The group’s revenue from advertising, sales, distribution and commercial printing activities fell from €1,67-billion in 2007 to €1,47-billion.
The local company publishes stalwarts such as The Star in Gauteng, the Cape Argus in the Western Cape, The Mercury in KwaZulu-Natal and The Sunday Independent nationally.
The Mail & Guardian understands that a local consortium led by Mbeki has approached publishing giant Caxton to partner it in a potential purchase of the group’s South African assets. Mbeki, who owns a stake in television production company Endemol South Africa through publishing company KMM Review Publishing, refused to comment.
Avusa has apparently approached INM’s Irish owners in a bid to buy the South African assets. The Mvelaphanda Group, founded by Minister of Human Settlement Tokyo Sexwale, owns a 25% stake in Avusa.
Avusa chief executive Prakash Desai told the M&G: “We are not aware of any assets that have been put up for sale.” Asked if Avusa would consider buying local INM assets, he said: “We believe that they have excellent assets, but they would have to be up for sale before we could discuss any interest that Avusa might have.”
Western Cape businessman Barend Hendricks, who has strong ANC links, is understood to be in discussions with the group to purchase its local operations. The M&G has been told that channels between the two parties are “open” and an offer is being considered. Hendricks also refused to comment.
He is a member of the controversial Elephant Consortium that purchased a 7% empowerment stake in Telkom. He received undisclosed profits from the R692-million dividend payment to the Elephant Consortium following Telkom’s sale of 15% of Vodacom to fellow shareholder Vodafone and the subsequent listing of Vodacom. The consortium also secured a 2% share in Vodacom, valued at R1,7-billion, as part of the transaction.
Tony Howard, chief executive of Independent News and Media South Africa, denied that there were any plans to sell local titles.
“None of the core publications or newspaper assets is for sale,” he said. “The South African company is a separate, free-standing business on its own and it is business as usual.”
But the company is in the process of identifying possible buyers for its advertising company, INM Outdoor, he said.
INM in the United Kingdom has been struggling to pay a €200-million bond issue that matured in May. But last month it managed to negotiate an extension to July 24 of its financial standstill agreement with its principal banks and bondholders.
The group’s flagship publication in the UK, The Independent, is struggling to stay afloat. Employees face retrenchment and there is speculation that it will soon be sold.
In the meantime, INM has been offloading assets such as a large portion of its stake in Indian-based Jagran Prakashan Limited—publisher of the most widely read daily newspaper in India, Dainik Jagran.
Business wire service Bloomberg puts INM’s market cap at €208-million, well down from the market value of about €2-billion it had in 2005. Its share price has plummeted from more than €3.80 during 2007 market highs to the current €0,25.
The company has been plagued by infighting between former chief executive Tony O’Reilly and dissident shareholder Denis O’Brien, a telecoms tycoon who owns a 26% share of the group. O’Reilly stepped down in May to be replaced by his son, Gavin.
O’Reilly senior is widely understood to have gained entry into the South African market at the advent of democracy through his friendship with key figures in the ANC. The relationship is believed to have soured, but it allowed him to buy South Africa’s Argus Newspapers.
Writing in the UK Independent, O’Reilly’s biographer, Ivan Fallon, called it the “best deal in Independent’s history”.
Despite the company’s losses in 2008, the South African arm of the business was by far its best performer. Local operations generated €69,1-million in operating profits, making it the largest positive contributor to the company’s bottom line. INM’s losses come predominantly from its UK business, which recorded an operating loss of €205,4-million.
Additional reporting by Lloyd Gedye