Mvelaphanda Group could emerge as the controlling investor in a R4-billion leveraged buyout of Avusa. Such a transaction would see Mvela achieving its long-term objective of having control of Avusa’s portfolio of newspaper assets.
It would involve Mvela selling its 21 percent stake in Avusa to the Capitau-led consortium for approximately R26 a share, or R800 million, and subsequently investing that R800m in the leveraged vehicle.
This is one of the lines of speculation sparked by Avusa’s Monday announcement that it had received an unsolicited expression of interest to acquire its entire issued share capital.
The expression of interest was received from Capitau Holdings, which is described as a leveraged finance specialist, and RMB Ventures.
A highly leveraged transaction, which would involve as much as R3.2bn of debt, is likely to involve the sale of all Avusa’s non-media assets in order to pay down as much of the debt as possible.
Yesterday Mvela’s shares closed 6.35 percent higher at R3.18. Avusa lost 0.8 percent to close at R24.80 after soaring 18.4 percent on Monday.
Avusa assets include Sunday Times, Business Day, The Times, Exclusive Books and Nu Metro Films.
In its statement Avusa noted that Capitau would only consider making a firm offer once it had received confirmation of funding from the members of its consortium and the approval of the various investment committees involved.
It also said a condition of a formal offer was that key members of the existing Avusa management team, but not all, would agree to continue employment after the transaction was implemented.
A further condition was that the consortium was satisfied with the results of a due diligence exercise on Avusa.
Capitau is probably best known for having finalised the junk bond funding of the Primedia private equity deal in the midst of the collapse of the private equity boom.
Avusa said in a statement that Mvela was not a member of the consortium but had, along with 59 percent of the shareholders, signed an irrevocable undertaking to support the acquisition. Avusa would be delisted and become the subsidiary of a new company.
The consortium is offering R26 a share, which represents a 30 percent premium to the spot price on the last trading day prior to the date of the expression of interest, and a 19.7 percent premium to the 30-day volume-weighted average price calculated from the last trading day prior to the date of the expression of interest.
While analysts were generally perplexed about the possibility of a buyout of 100 percent of the Avusa shareholders, one industry source speculated that a highly leveraged transaction might provide Mvela with the only opportunity available to get control of the media assets.
“Mark Willcox (the chief executive of Mvela Group) has been wanting to secure control of the media assets since his group raised debt to fund the R48 a share acquisition of a 25 percent stake in Avusa,” remarked the source.
He said that Willcox had not only significantly overpaid for the Avusa shares but had subsequently seen the stake watered down by a transaction (the acquisition of Carter UHC), of which he did not approve.
At least one minority shareholder, Cadiz Asset Management, which owns 0.2 percent in Avusa, said it would sell its stake if the appropriate offer for its clients was made. Rob Nagel, a portfolio manager at Cadiz, said the investment firm valued the stock closer to R30. - Business Report