Johannesburg - A lack of confidence in the strategic direction of Times Media Group (TMG) is the reason Caxton and CTP Publishers recently decided to whittle down its shareholding in the publisher of the Sunday Times newspaper, according to a person familiar with developments inside TMG.
Caxton has cut its holding in TMG to 7.53 percent from 11.6 percent by selling more than 2 million shares between June and December last year.
However, Paul Jenkins, Caxton’s chairman, denied that there was bad blood between Caxton and TMG, saying the sale of TMG shares was a means to raise cash.
“We like cash. We’ve got a big portfolio of investments,” he said, adding: “We regard that investment just like any other investment.
“We’re not sentimental. We just looked at our portfolio, we are rebalancing. We continue to talk with them. We print for them. They are our clients.”
Abdul Davids, the head of research at Kagiso Asset Management, said: “Caxton sold just over 2 million TMG shares but retained about 9.5 million shares.
“We consider the shareholding as strategic but non-core and hence we cannot speculate on the reasons for the disposal,” he said.
The liquidation by Caxton, headed by Terry Moolman, comes as questions are being raised about TMG chief executive Andrew Bonamour’s leadership.
There have also been suggestions that relations between him and Moolman were frayed.
“I think it’s their frustration with TMG. Maybe they’ve got no confidence in the business going forward,” said Theo Botha, an activist shareholder and commentator on corporate governance issues.
Failure to disclose
Also of concern was Bonamour’s failure to disclose to shareholders the criteria that led to the award of share options to members of his management team. “Andrew has got transparency issues which he needs to address,” Botha added.
Yesterday Bonamour referred inquiries to Moolman and the state’s pension fund manager, the Public Investment Corporation (PIC), which holds a substantial stake in TMG and its competitor, Independent Newspapers, which publishes Business Report.
Moolman did not respond to questions. But a source familiar with developments inside TMG confirmed that Moolman had begun to have reservations over TMG’s future.
The PIC, which had rejected the adoption of a remuneration policy at the TMG annual general meeting on November 27 last year, declined to comment on the share sales. “That is [Moolman’s] personal choice and the PIC would not comment on such,” it said, adding the PIC viewed TMG as a long-term investment.
At the annual general meeting, PIC investment officer Dan Matjila voted against the remuneration policy, which was adopted. “Matjila says the policy lacks disclosure on performance in meeting targets for bonuses to be paid to executive directors,” Bloomberg reported at the time.
The source familiar with developments inside TMG said there were concerns that the company would soon embark on another round of retrenchments as it tried to control costs and offset the prospect of the group losing government advertising, which constitutes an important chunk of the Sunday Times revenue base.
The source said the Caxton sale of TMG shares was in effect a vote of no confidence.
Even so, TMG shares have held steady since September 2012, trading broadly in line with the JSE all share index on expectations for a turnaround.
On both the trailing and forward price-to-earnings basis, TMG shares are trading at a premium to their industry peers and the broader market, which leaves TMG with very little wiggle room in the face of the question now being raised about Caxton’s intentions.
TMG currently trades at a trailing 12-month p:e of R116.47 and a forward p:e of R14.45, compared with the current p:e of R20.92 for the all share index. A p:e is a reflection of how much investors are willing to invest for each rand of profit in a company.
Bonamour took over as interim chief executive in January 2012 in a deal that involved his private equity company, Blackstar. He was appointed as chief executive a year later and has presided over massive restructuring of the firm, including retrenchments, the sale of Exclusive Books and cinema group Nu-Metro, and other non-core assets and the purchase of radio stations and a television company in Ghana.
Davids said the outlook for TMG had improved significantly after Bonamour disposed of Exclusive Books and Nu-Metro, which were underperforming businesses.
He also bought Multimedia, a broadcaster in Ghana last year. “The core newspaper assets should perform well especially with the 2014 elections and an expected recovery in ad spend,” Davids said.
Moolman was involved in the R2.3 billion purchase of all the shares in Element One, an unlisted investment holding company, which holds a nearly 40 percent stake in Caxton.
Element One evolved from the unbundling of TMG’s stake in Caxton into the separate vehicle.
A consortium comprising RMB, Remgro, Moolman, Caxton, Afmed and Noel Coburn offered R22.51 for each Element One share to shareholders that include Allan Gray and Coronation. The deal was voted on last month.
Jenkins denied that cash from the sale of TMG shares were used in the offer to Element One investors. “It’s a stand-alone deal, it’s got nothing to do with Caxton,” he said.
Meanwhile the Movement for Transformation in Media in SA yesterday called for a probe into the transformation of TMG, Sapa reported. - Business Report