Caxton sets watchdogs on Naspers
March 11, 2004
By Ann Crotty
Johannesburg - Just one week before the high court was due to sanction Naspers's multimillion-rand buy of the minority shareholding in M-Net and SuperSport, Caxton has brought an urgent application to the competition tribunal to prohibit the deal.
Caxton has requested that the proposed deal be declared a notifiable transaction in terms of the Competition Act. Naspers did not notify the competition authorities about the transaction because it believes the deal does not constitute a change in control.
The transaction, initiated late last year, will result in Naspers increasing its effective holding in M-Net/ SuperSport from 40.6 percent to almost 60 percent. Johnnic Communications (Johncom), the other major shareholder in M-Net/SuperSport, will increase its effective stake from 26 percent to just under 40 percent.
The complication for the competition authorities arises because M-Net/SuperSport is controlled by M-Net Holdings - an unlisted company that has 52 percent - through a joint control arrangement between Naspers and Johncom.
The transaction that is now under scrutiny does not involve any change in M-Net Holdings. It does involve an offer to the 48 percent minority shareholders in M-Net/SuperSport.
A significant block of this shareholding is in the hands of Phutuma, a black empowerment scheme.
About 84 percent of the minority shareholders recently agreed to accept the offer, which means that pending the sanction of the high court, it would be implemented.
A competition law expert said yesterday that the tribunal would have to decide whether Naspers had contravened rule 12 of the act, which states that a person controls a firm if that person beneficially owns more than 50 percent of the issued share capital of the firm.
If the tribunal rules that the transaction should have been notified, then the finalisation of the deal will be delayed by several months while competition approval is sought.
If, in this process, the tribunal rules that the transaction is anti-competitive, then the deal would be prohibited - or approval granted with conditions attached.
Caxton's action appears to be motivated by fears that when M-Net/ SuperSport is delisted, Naspers will have the opportunity to offer advertisers cross-subsidised packages that will include M-Net/SuperSport and the wide array of magazines and newspapers owned by Naspers.
This could give Naspers a significant advantage in the highly competitive market for advertising expenditure in which it is a keen competitor. The approach to the competition authorities could result in a close scrutiny of three relatively new aspects of local corporate life - black empowerment, new accounting rules and competition law.
The deal was prompted by new accounting rules, the effect of which was regarded as being prejudicial to M-Net/SuperSports' empowerment shareholders.
The tribunal will hear the matter on March 19.
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