The Competition Tribunal will on Friday hear arguments from printing and publishing company Caxton in support of its application to interdict the JSE-listing of Novus Holdings, a subsidiary of competitor Media24.
Novus was formerly known as Paarl Media Group.
Media24 said in a statement on Tuesday that it would oppose the application that according the CEO Esmaré Weideman has “simply no merits”.
Novus had intended listing on the JSE on March 26, but the local bourse confirmed on Wednesday that the listing had been postponed, adding that it will [still] take place during 2015.
Media24 head of corporate communications Anika Ebrahim states: “We have every intention of proceeding with the listing. The matter will be heard by the Competition Tribunal on Friday, 20 March 2015. Given the timing of this hearing, Novus Holdings will grant eligible investors an extension to apply to participate in the Offer and therefore extend the listing date to Tuesday 31 March.”
Caxton and Media24 were at loggerheads over Paarl Media Group last year.
In a statement issued in August last year Lambert Retief, non-executive chairman of Paarl Media Group, said he wanted to retire and sell his remaining stakes of 5% and 12.5% in the Paarl printing businesses to Media24. “Media24 already has more than 80% of the shares in both companies, but because I had a management agreement which would lapse, we had to notify the transaction to the Competition Commission as a ‘merger’,” he said at the time.
A competition lawyer who did not want to be named said when control in a company is transferred directly or indirectly to another entity, the Competition Act determines that approval has to be obtained from the competition authorities. Control in this sense would refer to the right to direct the strategic commercial direction of the firm, he said.
Last year the Competition Commission recommended the unconditional approval of the merger by the tribunal, but Caxton was granted permission by the tribunal to intervene. It asked among other things for the disclosure of the Naspers control structure and tabled what it considered the structure to be, based on its own research.
Media24 is a subsidiary of Naspers.
Caxton alleges that Naspers CEO Koos Bekker, former MIH head Cobus Stofberg and Sanlam are in ultimate control of Naspers. It alleges that these facts were not reported in a merger filing to the Competition Commission, despite a legal obligation to do so.
Caxton also disputed that the Paarl Media Group would retain its operational independence from Media24 after the merger – which would be a deviation from prior undertakings by the merging parties in proceedings before the tribunal.
The approval of Caxton’s intervention would have given Caxton access to documents filed for the merger, the right to cross-examine witnesses appearing during the hearing and to adduce oral and documentary evidence. The tribunal at the same time ordered that further information should be submitted about shareholders in unlisted A ordinary shares and their interests and that the commission should further investigate that.
The merger application was then withdrawn. Retief was furious and called Caxton CEO Terry Moolman a “vexatious litigant” who has “sued numerous companies in the past.”
Retief continued: “We simply can’t proceed with the deal, as Caxton will be as disruptive as they can and will paralyse us operationally for years to come, given the width and depth of the interventions allowed by the Tribunal. Caxton and their lawyers can in this way access Media24’s commercially sensitive information,” Retief said.
The decision to abandon the merger put an end to the investigation into the Naspers control structure but, at the time, the tribunal told Moneyweb it may be revisited if the parties come before the tribunal again.
Against this background Caxton lodged its latest urgent application.
The tribunal said: “Caxton allege that the Novus listing has made it necessary for Media24, Novus and Retief to ‘restate’ the existing management agreement, which it alleges, has the effect of depriving Retief of the operational and management control of the company which he currently enjoys. If the listing of Novus proceeds, Caxton alleges that the board of directors of Novus will be ultimately responsible for the management and operations of the company. Caxton alleges that the appointment is determined by Media24 as the “controlling” shareholder and thus it alleges, there is a change of control in Novus by Media 24 from joint to sole control.”
Caxton seeks an order from the tribunal requiring that the competition authorities be notified of the acquisition of sole control by Media24 over Novus. It further asks that the implementation of the restated management agreement be prohibited until approved by the tribunal.
The competition lawyer said it seems as if the case will turn on whether management control of Novus has indeed changed.
According to Novus’ pre-listing statement, a restated management agreement with Retief was entered into on February 23 this year. This agreement determines among other things – and subject to the Memorandum of Incorporation, JSE listing requirements and the law – that Retief appoints and dismisses the CEO, COO and CFO of the group, oversees and supervises the CEO, ensures the operational independence of the group, with specific reference being made to Media24 and oversees the strategic direction of the group.
Retief said on Tuesday: “There is no substantial difference between the existing management agreement and the one to be implemented post-listing.”
Caxton would not comment at this stage.
Moneyweb is a subsidiary of Caxton.