 Now Mvela gives up bid to scupper Avusa deal IN A move seen as a victory for media group Avusa, its biggest shareholder, Mvelaphanda, said yesterday it would no longer oppose Avusa’s proposed R925m acquisition of printing company Universal Hirt & Carter (UHC) — even though it still believes the timing is bad for Avusa. The dramatic about-turn follows a behind-the-scenes battle over the future of Avusa, one of SA’s biggest media groups, and comes after Mvelaphanda met with the representatives of UHC on Monday. Mvelaphanda, which owns 25,5% of Avusa, the publisher of the Sunday Times and part-owner of Business Day’s publisher BDFM, was forced into retreat after it failed to convince other institutional shareholders, in particular Coronation Fund Managers with 25% of Avusa, to vote against the acquisition. It was unclear last night, however, whether in accepting that the deal would go ahead, Mvelaphanda had also revised the clear criticisms of both Avusa management and Avusa’s board that it has expressed over the past few weeks. Mvelaphanda earlier opposed the deal, arguing it cost too much and would imply an expansion into print rather than digital media, which its great rival, Naspers, has made such a success of. It also emerged yesterday that in trying to block the proposed deal, Mvelaphanda approached two shareholders recently with an offer to buy their Avusa shares. It planned to use the new shares to help block the deal. However, faced with paying a premium for these shares of R250m-R300m, or throwing its support behind the proposal, Mvelaphanda has now decided the acquisition will be “value neutral” for Avusa. It is likely to abstain when the acquisition is voted on tomorrow. In spite of its reservations, Mvelaphanda said, however, it feels UHC is a good company. Victorious Avusa CEO Prakash Desai yesterday welcomed Mvelaphanda’s about-turn, saying he was happy “with the reconciliatory approach, and Mvelaphanda’s confidence in Avusa management is most welcomed”. A spokesman for Mvelaphanda said yesterday: “It was not personal, we still believe UHC is a good company, it was our considered view that the deal was not good for Avusa. “We held extensive talks with management of UHC and they indicated value in the business we had not seen. “They outlined their business in detail to us and they indicated a common ground with our vision to create a sustainable digital and print strategy with management at Avusa, so we decided the deal would be value neutral and that we would not oppose it.” Mvelaphanda, in a JSE statement yesterday, said it believed “Avusa was entering into the transaction at an inappropriate time in its business cycle” which “in effect undervalues Avusa”. However, it would go with the majority decision because it considered it vital that “Avusa have a strong and united board in order to achieve its objectives of being a leading media house in Africa”. “In the event that the majority of shareholders in Avusa vote in favour of the transaction, we will constructively engage with and support Avusa and UHC’s management in order to ensure that maximum value is extracted as a result of the transaction.” The proposal was originally supported by seven of 10 members of the board, with three Mvelaphanda directors abstaining. It originally believed that without its 25,5% vote the deal could not be passed. It has now conceded that it did not put its objections to the board at the time of the original proposal. Mvelaphanda, which has conducted its own analysis, originally said the deal was badly priced and would move Avusa from its core competency of running newspapers. The proposed deal, announced in June, envisages the acquisition be paid for with 20,4-million new Avusa shares and R462,5m cash. Avusa, in a shareholder memo, argued Mvelaphanda was unhappy at the potential dilution of its shareholding to 21,3%, but Mvelaphanda CEO Mark Mr Wilcox has denied this. According to Avusa, Mvelaphanda, which was represented on the investment committee that reviewed the deal, initially backed the deal and the price. There were concerns in the market that should the deal fail, it would affect the future of senior management at Avusa. Mvelaphanda’s bid to stop the UHC deal had looked set to succeed after Coronation’s chief investment officer Karl Leinberger said Coronation was taking another look at the deal. He later said that as an investor not involved in the management of Avusa, Coronation was inclined to support management’s views. Rob Nagel, analyst at Cadiz Asset Managers, said it believed Avusa’s acquisition of UHC was a good deal. “It is a good-quality company. They have a good track record and a customer base that speaks highly of them. There are not many media companies of this size left.” Opponents raised concerns that UHC prints telephone directories as one of its functions — a contract that might not be renewed. The contract, now running for 12 years, makes up 4% of UHC profit and 3% of revenue. The company’s real value, according to a document to shareholders, is in retail strategy, production and above and below the line advertising. Avusa says it wants a share of the R16bn print media marketing spend. [email protected] -- You are subscribed. This footer can help you. Please POST your comments to [email protected] or reply to this message. You can visit the group WEB SITE at http://groups.google.com/group/yclsa-eom-forum for different delivery options, pages, files and membership. 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