Two major events that took place last week are set to change the business of media in South Africa. The first was an announcement from Times Media Group that it would be leaving the Johannesburg Stock Exchange as major shareholder, the Blackstar Group, made on offer to buy the shares it doesn’t already own. And the second was Naspers’ decision to unbundle its printing division, the Paarl Media Group, into a separately listed company called Novus. Glenda Nevill reports.
The Times Media Group transaction will take place as Blackstar mergest with Tiso Investment Holdings, which has an interest in Kagiso Tiso Investment Holdings. Kagiso, of course, has stakes in radio and more recently, television in the form of Glow TV and a 50% stake on production house, Urban Brew. Business Day reported that TMG investors would now have the choice of “1.45 Blackstar shares for each Times Media share or a cash payout of R22 per share. The cash portion will be limited to a maximum R500m”.
CEO of TMG and Blackstar, Andrew Bonamour, told BDTV, “Yes, we have over the last 18 months, as you know, we have diversified, but also only 45% of our group earnings come from print at the moment and you must remember that the print industry does produce very strong cash flow and it’s what we do with that cash flow… and I think also we’ve got all our newspapers still profitable and we’ve been able to keep our competitors at bay on that side, and I do believe that as we… something like the Sunday Times will be relevant as a newspaper… profitable for a long time into the future.
“So although we see where things are going and we’re investing in digital and we’re investing in other areas, the prognosis for print — at least as we’ve run them for the short and medium term — are still positive.”
As TMG delists, the new group formed by Naspers, Novus, will list at the end of March. The global media group, with massive digital investments, will use the listing to reduce its holding in the printing division to between 60% and 70%. It runs 11 specialised printing plants across South Africa and one tissue plant.
In a statement, CEO Stephen Van Der Walt said the listing would “unlock its growth potential and diversify into manufacturing and technology that is related to its current core business of print. This is reflected in the name change to Novus Holdings, which in Latin means ‘new’ and is consistent with its new strategy, new prospects and new technology”.
“With such strong foundations in place, and with significant growth potential on offer through extending and diversifying our product range in the sub-Saharan region, we believe the time is right to take the next step and explore diversification directly linked to our core competencies while consolidating market positions in our current facilities,” Van der Walt said. “The company has a strong market position in workbooks, magazines newspapers, catalogues, retail inserts and books with most major publishers and retailers throughout sub-Saharan Africa as clients.” The board will comprise of 11 directors of which six will be independent non-executive directors and be appointed from the majority shareholder, Media24, but it is unknown at this stage the size of its stake.
“There’s not much left in terms of direct investment in South African media groups,” says investment stategist Magnus Heystek, director of Brenthurst Wealth Management. “Naspers has gone the route of technology and the internet. Its media stake is minute. What’s interesting is that with Napers hiving off its printing company, and listing Novus, and with its newspapers and print operations included, could this be a precursor to closing its printed news? It’s not making money…”
He says Netwerk24, a behind-a-paywall website devoted to news in Afrikaans, is already showing that it is profitable, despite initial resistance from the public.
Heystek says TMG, primarily a newspaper company, has “cleaned up its operations” and “not been doing too badly”, making “very nice profits”. He says with global investors such as Warren Buffet buying into newspapers, and Amazon.com’s Jeff Bezos buying the Washington Post, it’s not all gloom and doom for print operations. Nevertheless, other media sectors – such as television and radio – are doing “very well”, which is no doubt why TMG is investing in companies that own such properties. But, he adds, with the JSE pulling out of results advertising, business print titles have been hard hit and that’s reflected by the number of retrenchments seen in the industry over the past couple of years.
“They’re definitely employing younger, cheaper staff. You can see it in the quality,” he says, adding that there are still “pockets of excellence”
Heystek said the movements in the business of media are reflective of the current state of the economy. Rumours that Primedia might relist on the JSE could have further impact on the media industry.