Survé reveals his vision for INMSA
This past week Business Report editor Ellis Mnyandu sat down for an extensive interview with Iqbal Survé, the chairman of Sekunjalo Independent Media. He asked him to shed light on what he envisages for the future of South Africa’s media landscape after his R2 billion acquisition of Independent News & Media South Africa (INMSA), the local business of Irish-based Independent News & Media. Survé also provided, for the first time, insights into how the deal unfolded and what prompted him to do it. What follows is a Q+A from the interview:
BR: When and how did you realise that you must buy INMSA?
A: It was probably a year go, when I looked at media in South Africa and the fact that it was not transformed, and that of the four media groups none was black owned. My first idea was to establish an e-newspaper, a weekly, to give voice to a diverse society and also to promote an African agenda, very much along integrating South Africa into the African continent because I think there’s really a lot of very positive things happening on the continent.
I also felt that the voice of black intellectuals in this country in particular was absent. In fact, if anything, they were moderating their views in order to accommodate the ownership patterns that were not reflecting the diversity of the country. Those were the issues that were foremost in my mind.
BR: How did you ascertain that INMSA was a valuable asset?
A: When I did a bit of research I realised that Independent in Ireland were faced with a financial predicament in that they had about e400 million (R5 billion at Friday’s rate) of debt and they were under enormous pressure from the banks to refinance that debt; repay it by the middle of 2013, and I think that was extended to the middle of 2014. So, I thought that represented a unique opportunity to go and approach them to acquire INMSA, since it was a highly profitable, well-run, large media group, with… good assets and good people. That was when I initiated the bid for Independent. Mine was the first offer for Independent. It was an unsolicited offer at a time of about R2.4bn, with a view to gaining exclusivity in order to do a due diligence.”
BR: How did you arrive at R2bn from R2.4bn?
A: We did two things, which I think were absolutely critical. First, we took the bid seriously, so we had a headstart since we had put in an unsolicited offer. And I appointed Citibank’s global advisory team to advise me on the transaction as well as my own internal corporate finance/due diligence team. So we researched INMSA backwards and forwards, based on publicly available information.
We also did our analysis of global transactions in the media space, in particular newspapers, the kinds of multiples they were going for. Of course, we can talk about what’s happened subsequently, and we were proven right. You buy at the bottom of the cycle. There was no doubt that the newspaper industry in the last decade was in the declining phase, and the key was to time your purchase right. We kind of followed that principle from a value equation, that you want to get in at the bottom of the cycle. We also had the added advantage that the Irish were heavily indebted and needed to reduce the debt because it was coming up for repayment.
We knew the business well. We were serious and we had lined up our funders on the back of that seriousness. We had a very clear strategy on what we wanted to do.
BR: What are the two things that convinced you to buy this asset?
A: Well it is not expensive, that’s for sure, if you look at global multiples. Where we set the value it was actually lower than the global multiple for media assets. If you want to describe cheap, let me put it this way to you: Jeff Bezos paid $250m (R2.6bn at Friday’s rate) for Washington Post, which is losing $55m a year; losing – that’s very expensive. The point I am trying to make: we are buying a profitable business. Obviously people don’t know this because they don’t know INMSA’s fundamentals.
From a philosophical level, I wanted to bring this asset back home. It is a South African asset. It should never have gone overseas. It is a valuable part of our country’s culture, media landscape, philosophy. Secondly, I thought: if the management team could do so well despite having all the dividends exported back to Ireland, if we could keep, retain the dividends or surplus capital, we could really position the business to do better.
It was an exciting opportunity in keeping with our philosophy of transforming our economy and our country, bringing about black economic empowerment (BEE) and transforming and adding a diversity of voices. But as I said upfront, I would have welcomed anybody bringing this asset back home because it’s a valuable part of South Africa because some of its newspapers have been around for many, many years. That kind of history is a South African history.
BR: A lot is said about the role Nelson Mandela played in having this asset sold to the Irish. What are your thoughts on that?
A: The truth of the matter is I don’t think he, willingly, would have done that. The reality is that it was owned by Anglo American, and it decided post-1994 to have the asset outside of the country to safeguard what, in their view, was probably its editorial independence. I guess Mandela at the time would have, as part of normal government processes, have accepted that… but I don’t think he willingly would have gone out there and said do this. This is a gift for Mandela, the fact that we bring back home this newspaper group because he must have been very sad… by the fact that this valuable asset went overseas. I am just delighted that he has lived to see this moment.
BR: You have faced a lot of criticism, scrutiny and even scepticism about the funding for this deal. Why do you think this was the case?
A: I think, first of all, people are not used to BEE transactions where a company is bought 100 percent. Never in the history of this country has a media asset been 100 percent owned by black people. It’s never been done in 20 years of democracy… Normally, it’s about being a partner on a junior basis – 5 percent stake here, 10 percent stake there.
The second thing is that the media itself has never been transformed. So, I don’t think they were expecting that to happen.
Thirdly, they did not know what the fundamentals of INMSA were. They were speculating that because Independent in Ireland was in trouble, Independent in South Africa was in trouble.
In fact I was shocked wherever I went people said to me, are you buying a bankrupt business? I said what? Do you know INMSA is a highly profitable business? They didn’t see the difference between the two or didn’t bother to read the annual report of the Irish. It was all based on misinformation. The competitor media groups were the one’s that created the perception or the issue that this was a difficult transaction. It was an agenda, to be frank.
BR: There persists a view that says, who is this Iqbal Survé? How does he make his money?
A: I am fiercely independent. And nobody owns me. That’s what people fear the most. I am not a front for anybody. I have my own capital base. I do things my way. I am not afraid to say what I think. I call a spade what it is. I have nothing to fear. I say what is right, I say what I believe. They want you to say what they say. They want you to be a parrot.
They really fear my independence of thought. I don’t owe anybody anything and I am not going to conform to the way they want me to conform. I am not arrogant about it. In fact, I am someone that builds consensus, coalitions with people, but I have my own views on life. People are not used to businessmen like me saying such things.
BR: How do you describe these people? What do they represent? Who are they?
A: These are people that are used to the old style of doing business – backroom doors, behind smoke filled rooms with cigars, they just haven’t changed. The world has changed… They are stuck in the old ways of doing things.
BR: Is this a black and white issue?
A: I think it’s an ideological issue to be frank, which has part of its element in race as well, but I don’t think it’s a racial issue. It’s ideological. It’s an ideology of saying listen, there’s not just one way of doing business. There’s many ways of doing business. There’s not just one kind of person in this world with one set of ideas.
There are many people with different sets of ideas, very many different kinds of voices. Black people can be as conservative as white people and white people can be as liberating as black people. So, it’s not really a racial issue. The issue is about mindset. What I represent is the mindset of freedom; the mindset to speak unashamedly what you believe in; the mindset to tackle authority, those that are powerful, to give voice to the poor.
But when you hear me say these kinds of things, you might say but this is a businessman talking like an activist, socialist, whatever. I have been an activist, why should I change. The fact that I am a businessmen does not mean I must stop caring about my country.
BR: There is a view that the Irish have presided over nearly 20 years of value destruction, asset stripping, which has made INMSA unable to compete. Essentially, INMSA has been gutted by cost cutting, lack of investment. How do you hope to turn this asset around?
A: The first point, being a businessman, capital dictates your strategy. Without capital you have no strategy, you continue to go on and survive. The way we have structured this transaction is that there will be a retention of surplus profit for the business to grow and for us to undertake a very aggressive growth strategy in various sectors, which I don’t want to outline too much. They are already scared of us and I don’t want to make them more scared.
The difference between this company – pre-Sekunjalo/post-Sekunjalo – is that it now has the capital base to be able to compete more effectively in the marketplace. To be frank, despite its restraints, management has done well, although with consequences. It has generated surplus profit, it’s not a loss, but with consequences… and the consequences have been at the expense of the growth of the company. That’s a reality. We have to face that reality.
BR: Are you at liberty to say how much of a capital injection you are talking about?
A: No. I am not giving our competitors any idea what we’re going to do. They are desperate to find out how much capital we have, and how much we are going to spend. Quite frankly, it’s none of their business. They will find out in the market place when we compete with them.
BR: What is the most immediate thing you plan to do with regards to staff? We have some of the country’s most talented journalists but they have been demoralised by the gutting of the company over the years.
A: I think the first thing that I have to do is to get to know the people. I have gotten to know some of the people in this process leading towards this investment. Now we have to get to know them better. It’s like a courtship. The best romance is when you know each other well. And the lasting romances are when you really understand each other’s strengths and weaknesses, and when you understand how you work well together. My entire life I have built coalitions and gotten the best out of people. I think we are going to go through that process.
The second thing, the media world is changing and it’s important to understand how that change impacts on this business – where are the opportunities, where are the gaps and where are the places that we need to fill. Third, investing in technology is a critical component of the future strategy.
Fourth, investing in our own capacity building in whatever area that might be and that might be capacity in terms of hard assets, technology, people, skills development.
I think a cornerstone of what we need to do is have good journalism, create a future for journalists in this country and perhaps a journalism school could be a very important component of that. If I were an employee of Independent right now, you’re facing a fantastic opportunity to be part of a global network, a global strategy; you are given the creativity to think.
BR: How do you deal with the fact that the company has not done a good job communicating in the past, especially to staff?
A: What you have told me says to me as a medical doctor: the brain cannot function without the heart and neither can the heart function without the brain, but if the heart is able to influence the brain we will be able to put all those things right.
The metaphor of the heart is the soul of the company. The soul of the company needs to be reignited. We now have a situation for the first time where management can rediscover that soul and creativity. We must give ourselves time to communicate, to rediscover who we are and to be proud of who we are.
It’s history in the making. Feel the vibrancy. Feel the warmth. Feel the future.
* Follow Ellis on Twitter @Ellis_Mnyandu