The share price of Times Media Group (TMG), formerly known as Avusa, climbed yesterday following news that Caxton had acquired Mvelaphanda Holdings’ 7.3 percent stake.
TMG’s assets include 100 percent of The Sunday Times, 50 percent of BDFM as well as Exclusive Books and Nu Metro Cinemas.
The purchase by Caxton, which now has a 10.4 percent stake in TMG, is the latest of a series of purchases by key TMG shareholders. At the end of December Coronation Asset Management announced that it had increased its stake to 15.5 percent from 10 percent.
During November, Harry Mehta, a director of UHC which holds 16 percent of TMG, made several purchases of TMG shares at between R13.50 and R14 a share.
Abdul Davids, the head of research at Kagiso Asset Management, said Caxton’s purchase should be positive for the TMG share price as it removed the overhang of the shares that had been held by Mvelaphanda.
Mvelaphanda had indicated in June last year when Blackstar announced the details of its plans to restructure Avusa, that it was a seller of the 7.3 percent stake it would have in TMG after the restructuring. Before that, Mvelaphanda held 21.3 percent of Avusa.
This week’s sale by Mvelaphanda, brings to an end its value-destroying investment in Avusa. In 2007 Mvelaphanda paid R49 a share for a 25.5 percent stake in Avusa in a deal valued at about R1.5 billion. A large portion of those shares were sold for R24 a share in last year’s Blackstar-backed restructuring of Avusa into TMG with the bulk of the remainder sold to Caxton at approximately R13.50 a share. This indicates that Mvelaphanda may have lost almost R900 million on its investment in Avusa.
The price paid by Caxton for Mvelaphanda’s shares in TMG has not been disclosed, but analysts estimate that given the current trading price of the share, it was likely to have been about R13.50 to R14 a share. This puts a value of about R130m on the Caxton purchase, which will be easily absorbed given Caxton’s estimated cash resources of about R2bn. Caxton has valuable printing contracts with TMG.
In addition to Caxton and Coronation, the major shareholders in TMG are UHC, the Public Investment Corporation, Kagiso and Blackstar.
TMG has reported dismal performances in recent years and has been beset by management controversies, which have seen a number of executives depart. However, analysts say that the recent spate of buying could indicate investors believe that the worst is over.
The shares closed 2.3 percent up at R13.70 yesterday.