Investors Change Strategy

Michael Hedges July 16, 2012 Follow on Twitter

By all appearances foreign investment in local publishers and broadcasters is waning. Sometimes it is the result of change in corporate strategy to “concentrate on core assets.” Sometimes foreign owners are invited to leave once development investment has been spent. It is an interesting cycle.

Dublin-based Independent News and Media has hired investment advisors to “work up to a sale” of its South African newspapers, reported the Financial Times (July 11). “The company is assessing all its options,” said a spokesperson confirming the FT story, quoted by Business Report (July 12). The reports set off a swirl of speculation about both the business and political context of a transfer of South Africa’s largest publisher to local owners.

INM’s South African investments began with former chairman Anthony O’Reilly’s purchase of Argus Newspaper Group from the Oppenheimer family in 1994. The South African company currently publishes 14 newspapers – including Johannesburg tabloid The Star, Cape Town’s Cape Times and Cape Argus and Durban Zulu-language daily Isolezwe - several community newspapers and operates online news, property and employment portals.

At the top of the bidding speculation for the INM South Africa business is Sekunjalo Investments, mentioned in the FT story. Its executive chairman Iqbal Survé has had “about eight meetings” with INM shareholders and directors since the first of the year, reported Business Times (July 14), including the INM annual general meeting (AGM) in Dublin last month. Other reports say Sekunjalo Investments has funding for the deal in place, partially from Middle Eastern sovereign wealth funds, with the forthcoming bid including “a union and a US technology company that specializes in online media.” The value of the INM South Africa business is about ZAR 2.5 billion, roughly €250 million, said the FT story.

The Media Workers’ Association of South Africa (MWASA) announced its intention to set up a “worker’s trust” to either take over the company or be a “substantial” investor. MWASA general secretary Tuwani Gumani complained that profits from South African operations were repatriated to Ireland. “And those profits have largely come at the cost of jobs,” he said, quoted by Business Report (July 13).

Others in the bidding rumor mill include Hosken Investment executive chairman Marcel Golding, said to be “very close” to INM’s biggest shareholder Denis O’Brien, Andrew Bonamour, CEO of Blackstar Investments and a director of publishing competitor Avusa and Moeletsi Mbeki, younger brother of former South Africa president Thabo Mbeki. “I think this company should have been majority owned by local companies to start with, so I would support whatever initiative there is to create a consortium to buy this company,” said Mr. Mbeki, quoted by Times Live (July 13).

Avusa, the multi-media company and publisher of market leading Sunday Times, has been undergoing a take-over by Mvelaphanda Group (Mvela), one of its shareholders. The aforementioned Blackstar Investments is the largest shareholder in Mvela and Mr. Bonamour is currently its interim CEO. The ZAR 2.3 billion bid, roughly €220 million, is supported by most shareholders.

South Africa’s media sector is robust with nearly 100 daily, weekly and community newspaper titles, private and public broadcasting and accelerating new media. Media24’s Daily Sun tabloid “turned the market on its head” by targeting the country’s “middle market.” The advertising sector is world-class and ad spending in 2011 was ZAR 32 billion (about €3 billion), up 11% from 2010.

Press freedom monitors have consistently ranked South Africa above the rest of the continent. There was something of a slide in the Reporters sans Frontieres 2012 Press Freedom Index which dropped South Africa to 42nd after 38th in 2010 and 33rd in 2009. Freedom House noted (May 2012) “the increasingly restrictive legal environment for independent media in South Africa remains a cause for serious concern.”

At the INM AGM (June 8) in Dublin chairman James Osborne and CFO Donal Buggy, both appointed by Anthony Gavin, were dismissed. “Lack of leadership has cost the company dearly over many years,” said dominant shareholder Denis O’Brien. “The challenge facing Independent News & Media is a daunting one. For the company to return to fiscal strength, it must display the leadership, commitment and take the necessary decisions to convince its lenders and the investment community that it has a future rooted in reality.”

See also in ftm Knowledge

Media in Africa - Growing Pains

Africa's media has a dynamic all its own. Its newspapers, television, radio and advertising are world-class. New media is taking hold. At the same time, some governments seek blinding repression. This ftm Knowledge file looks at the great and not-so-great. Includes Resources 90 pages PDF (September 2010)

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