Primedia's dispensation under spotlight
September 3, 2003
By Ann Crotty
Johannesburg - The circumstances under which a controversial dispensation was granted to the controlling shareholders of Primedia three years ago is going to come under the spotlight at a hearing of the Securities Regulation Panel (SRP) next week.
The SRP will be hearing an appeal from Primedia's UK-based shareholder, Active Value, on the dispensation that was granted to the voting pool that controls Primedia. The dispensation has allowed the pool to increase its holding above 35 percent without making an offer to minority shareholders. Active Value holds a 34.9 percent stake in Primedia.
The appeal was prompted by the recent disclosure by Primedia chief executive William Kirsh that the voting pool, which includes the Kirsh family and the Mineworkers Investment Company (MIC), now holds 41 percent of the company. Kirsh explained that three years ago the pool had been granted a dispensation by the SRP.
Mark Barnes, who represents Active Value, said:
"A dispensation like this is a highly disclosable fact ... surely there was an onus on Primedia to disclose this information."
Barnes also noted that if the dispensation was granted for black empowerment reasons, then the MIC's stake should be held independently and not as part of a pool dominated by white shareholders.
SRP executive director Richard Connellan said he could not comment on the matter, but sources close to the SRP said such a dispensation would have been accompanied by a publicity requirement.
Kirsh is emphatic that such disclosure was made. An announcement issued by Primedia in March 2000 refers to the fact that the MIC had entered into a joint voting pool with the Kirsh consortium and held a combined 31 percent but there was no mention of a dispensation from the SRP. The dispensation from the SRP appears only to have been referred to in a Sunday Times article of March 19 2000.
A letter written by Connellan to Primedia's lawyers on March 29 2000 states that "dispensation is granted from the requirement for a mandatory offer to be extended to the remaining Primedia equity holders should the presently constituted concert parties acquire further voting equity in Primedia increasing their aggregate holdings to 35 percent or more".
The letter also states that if the MIC becomes the dominant member of the voting pool or if the MIC's individual holding ever exceeds 35 percent, then an offer will have to be made to minority shareholders.
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