Johannesburg - Active Value Funds, UK-based active investors who bought into Primedia in May this year, said yesterday, in opposition to the proposed merger between Primedia and Kagiso Media, that the management of Primedia had not proven it could unlock shareholder value.
Julian Treger, an Active Value fund adviser, said: "As a Primedia shareholder, we would like to see the company focus on its core business and strategy."
He said by buying Kagiso Media, Primedia was exposing itself to increased financial and operational risks, and non-core businesses such as exhibitions and publishing.
If the merger went ahead, Active Value's shareholding would be diluted by 10 percent to 23 percent.
Treger said Active Value was considering the next steps to take but could only consider exiting at "the right price, not the current R6".
The management of the two firms led by William Kirsh, the chief executive of Primedia; Roger Jardine, Kagiso Media's chief executive; and Kuben Pillay of Mineworkers Investment Company, yesterday began canvassing both firms' shareholders.
The roadshow in Cape Town continues today and its effect will be evaluated in January when shareholders vote on the proposed merger.
Kirsh said Active Value did not want to lose an opportunity to influence their short-term interests which were not good for the company's long-term goals.
"They didn't want us to invest any more capital in South Africa but overseas," he said.
Kirsh said most Primedia shareholders he had spoken to supported the deal and Primedia's focus on balancing its portfolio media assets in South Africa.
Jardine said Kagiso Media had proactively facilitated the merger taking advice from investors who said the company was too small.
"As a result, a lot of careful consideration was put into the merger strategy, with a view to building a media company that would entrench black empowerment," he said. Kagiso Media board members had "voted overwhelmingly in favour of the merger".
"My mandate is from the board,"Jardine said.
After the deal, joint black control in Primedia would be in excess of 40 percent, Kirsh said.
Primedia fell 20c yesterday to R5,80.