The Competition Commission has recommended to the Competition Tribunal that Media24 must sell its controlling stake in Novus Holdings. Media24, which is a subsidiary of Naspers, currently owns 66% of Novus, but the Competition Commission has decided that it may retain a stake of only 19%.
The decision follows the successful appeal by Caxton and CTP Publishers and Printers Limited against Novus’ listing in 2015. Caxton argued that the listing effectively gave Media24 sole control over Novus and therefore should have received approval from competition authorities as a merger.
The Competition Tribunal initially dismissed Caxton’s application, but an appeal was upheld by the Competition Appeal Court. Under the ruling, Media24 had to notify the competition authorities of a change of control.
This was filed with the Competition Commission in February 2016. On Monday the Competition Commission announced that it had recommended that the Competition Tribunal approve the merger, but on condition that Media24 divest itself of its majority stake in Novus.
Unbundle shareholding
The condition is subject to final approval by the Competition Tribunal, but in a joint Sens announcement issued by Naspers and Novus, Media24 indicated, “If the Competition Tribunal approves the merger condition, Media24 will unbundle the majority of its shareholding in Novus to the shareholders of Naspers, its ultimate holding company. The unbundling will be implemented as soon as reasonably possible after the approval date.”
This will be achieved by Media24 distributing the required holding to its parent company. Naspers will then distribute these shares as a dividend in specie to its shareholders.
In return, Media24 will receive cash for the value of the holding. Part of this will be distributed as a special dividend to shareholders of its BEE shares, Welkom Yizani, who collectively own 15% of the company.
Media24 noted that it welcomed the conclusion of the Competition Commission’s investigation, and despite the proposed unbundling it remains committed to its print media operations. It noted that these remain a core part of its portfolio.
Caxton response
Caxton’s non-executive chairman, Paul Jenkins, told Moneyweb that he believed the decision by the Competition Commission was a vindication of Caxton’s objections.
“Even though the merger has been approved with conditions, the condition is the divestment of the very asset they were acquiring,” said Jenkins. “That means we will no longer have a situation where the biggest publisher in the country owns the biggest printer, and that should hopefully open up the market to more competition.”
He noted that the print contract between Novus and Media24 was previously expressed to be exclusive. However, that exclusivity terminates if Media24 no longer owns Novus.
“Presumably that opens up the print market,” Jenkins said. “And therefore I am delighted. It’s a good day for the industry.”
In a statement issued on Monday afternoon, Media24 welcomed the end of the Competition Commission’s year-long investigation. “The timing of this next part of the process is dependent on the Competition Tribunal processes and we will work closely with all stakeholders to ensure that the process is concluded as soon as possible to end this period of legal uncertainty,” Media24 said, adding that, “Print media is and will remain a core part of Media24’s portfolio”. Media24 was “excited” about its future, and the “conclusion of this process enables us to focus on our objective of enriching the lives of our consumers through our strong portfolio of digital and print media products, efashion, ecommerce services and online job classifieds”.
This story was first published by Moneyweb and is republished here with the permission of the editor.
