How Tiso Blackstar may have lost its media empire to mounting debt
PRETORIA – Just more than a year ago Lebashe Investment Group backed off from a R3 billion investment in EOH (give that man a Bell’s whisky, or not?)
Instead, it invested R250m in EOH at a discount to the market price of 10 percent.
My guess is that the price per share could have been close to R28.
They had an opportunity to invest in two further tranches six months apart and they duly invested in the second tranche. This time round the price held at almost the same level – no surprise.
But on May 29 this year, the share price dropped to a low of R10.40. This time round Lebashe decided enough of a bargain was enough and opted out of the third tranche.
These investments, together with its shares already held in the group, took Lebashe’s stake in EOH to 29 percent.
On October 15, EOH reported the most horrific set of financial results imaginable. The company posted a comprehensive loss of R4.87 billion.
About 29 percent of that loss far exceeds the investment made by Lebashe.
As a result of Lebashe’s decision, EOH said it was entitled, at its discretion, to require the forfeiture of dividends on 10 million EOH A Shares to EOH and to redeem 10 million EOH A Shares for R1.
On June 27 this year, Tiso Blackstar announced that it had signed an agreement for the disposal of its South African media, broadcasting and content businesses (excluding Gallo and its South African radio assets) to Lebashe for a purchase consideration of R800 million.
The company agreed to dispose of its media, broadcasting and content businesses in Ghana, Nigeria and Kenya and its South African radio assets to Lebashe for an additional consideration of R250m. Certain conditions precedent were in place and, according to chief executive Andrew Bonamour, these have all been met and the deal will become commercially effective on November 30.
On October 21, Tiso Blackstar announced Provisional Condensed Consolidated Financial Statements for the period ending June 30 this year. Tiso Blackstar is a somewhat rare breed of a company in South Africa in the sense that it is incorporated in England and Wales and registered as an external company with limited liability in South Africa.
In the results there is an aptly named item “total comprehensive loss” for the current year of R581m and an adjusted (increased) loss for the previous year ending June 30, 2017 of R37m.
The list of “other losses” is a long list and it even includes a sub-heading of other losses under the heading, other losses.
The list includes the following: Impairment of loans to Robor and Robor-related loans; loss on re measurement to fair value less costs to sell – Africa Associates disposal group; loss on re-measurement to fair value less costs to sell – media, broadcast and content disposal groups; fair value loss on contingent consideration owing on acquisition of BBS; non-recurring costs incurred on relocation of Hirt & Carter Group; realised losses on disposal of subsidiaries; losses in respect of CSI (disposed of in the current year); other impairments.
If one looks at all these impairments it would seem that Tiso Blackstar has just sold its crown jewels to obtain relief from its debt burden. I certainly hope that Lebashe will not have a repeat experience with regard to this investment as with EOH.
It is the nature of trading that one party finds value in selling and another at buying at a certain level. However, at this point I believe Tiso Blackstar did a very good deal.
Lebashe chairperson Tshepo Mahloele said in his address to the Press Council of South Africa: “Therefore, we come into this industry with our eyes wide open and amid the gloom and negativity, we nevertheless foresee a bright future for the media industry, not just in South Africa but beyond our borders too.”
He said they were cognisant of the fact that a commercially unsustainable media business compromised the quality of content.
The newsrooms shrink, and expertise and skills disappear.
The resultant effect is sub-standard content and disregard of elementary ethical rules.
No one in the media space will disagree with this view.
Mahloele also believes that the absence of credibility creates a news lacuna that could only be filled by pedlars of propaganda, toxic politics, racists, hate speech and fake news.
Once the public start falling for such propaganda, fake news and political toxicity, it’s a clear signal of a breakdown of public trust in the media.
We are all aware how easy it is to make allegations and how hurtful and damaging it can be to spend time and money on lawyer’s fees, defending one’s innocence in front of commissions.
The word Lebashe comes from the acronym Legacy Balance Sheet.
They want to build a balance sheet that outlives the creators over the long term.
We wish his group well in overcoming legacy issues of the past while on its road to build a new legacy.
Tiso Blackstar will probably move to a different sector on the JSE after November and off the media radar.
Corrie Kruger is an independent analyst.