SA printing groups face new wave of change
Caxton and Perskor's R3.4bn merger is likely to be the first of several switches in ownership, writes SVEN LUNSCHE
However, the deal will see a black company, Eric Molobi's Kagiso Trust Investment (KTI), losing control over two of the country's largest commercial newspapers, The Citizen and Rapport.
After bringing in black shareholders in the mid-90s, SA's media groups are now preparing for rationalisation as the industry's recent profit squeeze continues.
KTI won joint voting control of Perskor a year ago after buying a 16.5% stake. After Perskor's deal with Caxton, KTI's stake in the merged company will diminish to about 3% and may even be sold.
Perskor is also considering selling its investments in East Coast Radio and Radio Oranje, jointly held with KTI. This is subject to negotiations, says Perskor chief executive Piet Greyling.
KTI confirmed its reduced shareholding but said other negotiations were taking place which could affect its share price.
Caxton, which through CTP runs highly successful regional newspapers and printing presses, is the driving force behind the deal.
"We had reached critical mass in our core market. It was time to expand," said Caxton director Gordon Utian.
The Perskor deal could be the first in a range of transactions for CTP. Looming on the horizon is the 46% held in CTP by industrial group Johnnic which last month embarked on an "infotainment" strategy. "CTP is not a natural fit," said Johnnic CE Vaughan Bray.
Speculation is that Cyril Ramaphosa's New Africa Investments Ltd (Nail), which owns The Sowetan, is keen to buy the stake, together with Johnnic's interests in the Sunday Times.
CTP is also known to be interested in a black empowerment partner, although its founders, Terry Moolman and Noel Coburn, are not likely to give up control.
The shares are tightly held and releasing some of the 46% stake would boost its tradeability.
For Moolman, who is notoriously publicity shy, the deal fulfils long-held ambitions of becoming a major player in commercial media. Previous ambitions to buy a stake in the Independent Group were thwarted by fellow shareholders.
Now he will, in all likelihood, control 100% of The Citizen and 50% of Rapport - the detailed ownership structure of the two newspapers is still the subject of talks between Perskor and rival publisher Nasionale Pers.
In terms of the deal, CTP will end up with 75% of the merged company. For the deal, CTP was valued at R2.6-billion and Perskor at R850-million. Their combined turnover is just over R2-billion.
Both companies are traditional competitors in the lucrative, fast-growing, regional newspaper market. "Cost savings and rationalisation are obvious benefits," said Greyling.
Caxton has invested heavily in new machinery over the past two years. For Perskor, this alleviates expensive upgrades.
A third major benefit of the deal is that it reduces Perskor's exposure to the troubled school textbook market. Perskor earnings in the second half of its 1997/98 financial year tumbled by 55% after government cut textbook orders.
Greyling said Perskor would sell to shareholders its stake in Multichoice and in M-Cell, holders of 29% of cellular operator MTN, and eventually also rid itself of its 15% of M-Net. "We want to be in print media only. This is what motivated the CTP deal, " said Greyling.
The merger comes at a time when the ANC government is set to take another look at ownership patterns in the print media industry. The newly created government communications division, headed by powerful ANC member Joel Netshitenzhe, has as one of its tasks a review of regulation in the media industry.
Already faced by falling circulation figures and sluggish advertising revenue, new regulation could speed up the pace of industry rationalisation.