The Competition Commission has approved Part II of the Independent News & Media South Africa (INMSA) transaction being the participation of Chinese investors in the R2bn black economic empowerment (BEE) styled deal.
The transaction, in particular involvement of Chinese entities, has caused commotion in certain quarters. The champion of the deal Iqbal Surve has been forceful in defending the deal and characterizing it as a path towards transformation of the media.
The transaction sees the largest print media asset in South Africa change hands from the Irish, Independent News and Media, to a local consortium led by Iqbal Surve’s Sekunjalo.
The former anti apartheid activist cum medical doctor turned businessman, Surve has teamed up with the Public Investment Corporation (PIC) and Chinese investors for the INMSA deal. Coming to take about 20% of INMSA, the Chinese state connected players are China International Television Corporation and China Africa Development Fund (CADF).
This leaves the Sekunjalo consortium with 55% stake in the INMSA business to be renamed Sekunjalo Independent Media. The PIC is taking 25%. Surve has promised that the Sekunjalo portion will be infused with a BBBEE element as defined by participation of INMSA workers, trade unions and community development NPOs.
Surve has also promised to modernize, digitalize, the INMSA operation which had been squeezed to near death by the Irish. Digitalization becomes a real possibility with the involvement of China International Television Corporation in the deal. This element also promises to add spice to the ensuing shakeup of South Africa’s television market.
The Competition Commission said yesterday it has approved, with conditions, part II of the deal. “The first acquiring firm is Sekunjalo Independent Media. The second acquiring is Newco, a newly formed entity to be incorporated in the Republic of Mauritius. In the Shareholders Agreement entered between China International Television Corporation and China Africa Development Fund, it is indicated that Newco shall be called Interacom Investment Holdings Limited”, said the Commission.
“The Commission approved with conditions part I of the merger on 25 July 2013. In that transaction, Sekunjalo and Public Investment Corporation (PIC) acquired 75% and 25%, respectively of the entire share capital in INMSA. In part II of the transaction Sekunjalo’s shareholding is reduced from the initial acquisition of 75% in part I of the transaction to 55% shareholding in part II of the transaction”.
The Commission said it found no horizontal overlap and/or a vertical overlap in the activities of the merging parties, Sekunjalo, Sekunjalo Investment, CITVC (acting through Newco) and INMSA).
“The Commission therefore approves the proposed transaction subject to the following conditions which the merging parties have agreed to, that:
•Newco and Sekunjalo shall submit the signed shareholders agreement in respect of INMSA, and all ancillary agreements thereto, in respect of INMSA, to the Commission within 5 business days of its signature by the parties thereto;
•Sekunjalo shall submit the signed loan agreement in respect of the Newco’s and PIC’s loan(s) to INMSA, and all ancillary agreements thereto, to the Commission within 5 business days of its signature by the parties thereto;
•In order to ensure that no Competitively Sensitive Information is exchanged between INMSA and TMG post-merger, PIC shall not appoint any common directors and/or representatives to the board of directors of INMSA and TMG;
•In order to ensure that no Competitively Sensitive Information is exchanged between INMSA and Naspers post-merger, PIC shall not appoint any common directors and/or representatives to the board of directors of INMSA and Naspers;
•The PIC shall, notwithstanding the listing of INMSA or delisting of TMG and Naspers, ensure that its investments in INMSA, Naspers and TMG remain housed in different departments within PIC and shall continue to adhere to the existing safe guards,
•If, after the Approval Date and/or the shareholders agreement has been finalised, PIC acquires a form of control over INMSA as contemplated in section 12(2) of the Act, the Merging Parties shall file a new merger notification with the Commission in terms of the Act within 30 business days; and
•In the event that the PIC enters into any loan agreement with Sekunjalo and such a loan is converted into shares such that PIC acquires additional shares in INMSA; Sekunjalo will inform the Commission of this conversion within 5 business days of the conversion and will submit to the Commission all the necessary information including the signed loan agreement to enable the Commission to determine whether a notification is required. In the event that a merger notification is required, PIC will not, prior to obtaining the approval of the Competition Authorities, implement the transaction by exercising any of the rights accruing to such shares that may afford it control over INMSA”.