| Thu 19 May 2005, 17:40 | | Kagiso Media Limited - Announcement |
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Kagiso Media Limited - Announcement
Release Date: 19/05/2005 17:10:55 Code(s): KGM
Kagiso Media Limited - Announcement
Kagiso Media Limited
(Incorporated in the Republic of South Africa)
Registration number 1957/000036/06
Share code: KGM ISIN: ZAE000014007
(`Kagiso Media`)
Makana Investment Corporation (Proprietary) Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/011411/07
(`Makana`)
Tiso Radio (Proprietary) Limited
(Incorporated in the Republic of South Africa)
Registration number 2003/021851/07
(`Tiso`)
Restructuring of Makana`s radio interest into Makana Radio Communication
(Proprietary) Limited (`MRC`) and Shanike Investments No 42 (Proprietary)
Limited (`Shanike`) and the introduction of strategic shareholders into MRC and
Shanike
1. INTRODUCTION
Nedbank Capital is authorised to announce that:
Kagiso Media has, with effect from 14 December 2004, acquired 50% of the
preference shares and `B` ordinary shares in Thebe Convergent Technologies
Holdings (Proprietary) Limited (`TCT`) as part of the provision of replacement
funding in respect of TCT`s 45,2% interest in Kaya FM (Proprietary) Limited
(`Kaya`). Thebe Investment Corporation (Proprietary) Limited (`Thebe Investment
Corporation`) retains 100% of the ordinary shares in TCT. In turn, TCT provided
replacement funding to Mokgosi Holdings (Proprietary) Limited, which holds a
further 5% interest in Kaya (`the Kagiso Media/TCT Transaction`).
MRC has acquired Makana`s 100% interest in P4 Cape Town (Proprietary) Limited
(`P4 Cape Town`) and P4 Durban (Proprietary) Limited (`P4 Durban`) from Makana;
Shanike has acquired Makana`s effective 24,9% interest in Kaya as well as Kagiso
Media`s replacement funding to TCT; and
Kagiso Media and Tiso have acquired 24,9% and 41,7% in MRC, respectively, and an
economic interest of 33,3% each in Shanike. The latter three transactions are
jointly referred to as `the Makana Transaction`.
As a result of the Makana Transaction, MRC will hold 100% of P4 Cape Town and P4
Durban, and Shanike will hold an effective 50% in Kaya, represented by a 24,9%
direct interest and the preference share funding to TCT. Kagiso Media, Tiso and
Makana (`the Consortium`) will hold an effective shareholding of 24,9%, 41,7%
and 33,3% in MRC, respectively, and an economic interest of 33,3% each in
Shanike.
The transaction is subject to various conditions precedent including regulatory
approval as detailed below.
2. THE CONSORTIUM
The Consortium represents three parties with impeccable empowerment credentials;
an important consideration, given the current ownership regulations in respect
of private radio broadcasting licences.
2.1 Kagiso Media
Kagiso Media is controlled by the Kagiso Trust, one of South Africa`s most
respected, leading-edge non-governmental development finance organisations. The
Kagiso Trust manages development funds and programmes aimed at uplifting rural
and poor communities. Currently 52,3% of Kagiso Media`s shares is directly held
by black shareholders or black-empowered companies.
2.2 Makana
Makana is 70% directly black owned and controlled, making it one of the most
empowered owners of commercial radio in South Africa. The Makana Trust, the
controlling shareholder of Makana, is a broad-based, non-profit, non-political,
humanitarian vehicle formed in 1996 to provide benefits to approximately 6 000
ex-political prisoners and their dependants across the whole of South Africa.
2.3 Tiso
Tiso is an empowerment investment holding company owned approximately 59% by
black shareholders or black empowerment companies. The Tiso Foundation
Charitable Trust, which holds 16% of the shares in Tiso, focuses on the
development and training of black students and individuals and on development
and leadership skills in industries where Tiso is invested.
3. RATIONALE FOR THE TRANSACTION
The Consortium has availed itself of the opportunity presented by the
restructuring by Makana of its South African radio interests to merge the
Consortium`s respective interests in P4 Cape Town, P4 Durban and Kaya to form
MRC.
The effective economic interest of the Consortium in the suite of radio
broadcasting assets held between them will be as follows after the Makana
Transaction:
Radio asset Kagiso Makana Tiso Total
Media
Kaya 16,67% 16,67% 16,67% 50,0%
P4 Cape Town 24,9% 33,3% 41,8% 100,0%
P4 Durban 24,9% 33,3% 41,8% 100,0%
East Coast Radio 100,0% - - 100,0%
Jacaranda 94.2 60,0% - 20,0%* 80,0%
OFM 24,9% - - 24,9%
RadMark 47,5% - - 47,5%
* Held by the Tiso Private Equity Fund 1
Kaya was started in 1997 by Thebe Investment Corporation.
It broadcasts in Gauteng in an urban, African focused adult contemporary/jazz
format, and has a past 7-day audience of more than 1 million listeners. Kaya is
the sixth largest private regional radio station in the country by audience
size, and with revenue growth of 25% over the year to December 2004, is one of
the fastest-growing radio stations in the country, mainly because it offers
advertisers access to the increasing number of LSM 6-10 predominantly African
city dwellers in the 25+ age category.
P4 Cape Town and P4 Durban are greenfields licences issued in 1997 and 1998,
respectively. P4 Cape Town broadcasts in the Cape Town metropolitan area where
it attracts 531 000 weekly listeners, more than 90% of which is in the desirable
LSM 6-10 demographic. The station`s listenership has grown by 52% over the past
year.
P4 Durban broadcasts to the greater Durban metropolitan area. Over the past year
the station`s weekly listenership grew by 53% to 613 000. The majority of P4
Durban`s listenership is located in the LSM 4-6 band.
East Coast Radio is based in Durban and broadcasts to the whole of Kwazulu-
Natal, where it attracts 2,1 million weekly listeners. Its format of urban and
hot adult contemporary music, news and general information is primarily aimed at
the upper income groupings of the 25-49 year old demographic - the market
segment most demanded by media buyers. The station dominates this lucrative
market segment in its footprint, with 52% of all listeners with this profile
listening to the station.
Jacaranda 94.2 broadcasts from Midrand in Gauteng to most parts of Gauteng, the
Limpopo Province, Mpumalanga and the North West Province. The station positions
itself as the relaxing choice for harried Gautengers, playing an easy-listening
mix of favourites from the 80`s to the hits of today. It targets 30-49 year olds
in the LSM 6-10 market category and has a weekly audience of 2,8 million
listeners.
RadMark is a radio airtime sales house that targets national advertisers. It
already performs the national sales function for the entire suite of radio
assets (with the exception of OFM) and commands annual advertising spend on
behalf of this suite of assets in excess of R300m, representing in excess of 20%
of the estimated total annual advertising spend on radio in this country. The
suite of asset provides RadMark with 7,4 million weekly listeners and a national
footprint of strong and growing regional radio brands, a strategic imperative to
compete with radio stations that have national footprints.
MRC will have a broad based empowerment shareholding coupled with shareholders
with strategic radio experience and available financial resources that will
enable the Consortium to continue to successfully develop their radio assets in
their respective markets.
Kagiso Media will contribute technical expertise, and through RadMark, the
ability to package these stations to national advertisers.
The grouping of radio stations will aim at extracting economies of scale and
synergies between them, and the transactions will result in an improved
alignment of the shareholding in RadMark with that of its client stations.
4. CONDITIONS PRECEDENT
The acquisitions are subject to, and will become effective upon the fulfilment,
of the following conditions precedent:
the execution of appropriate sale and shareholders` agreements; and
the approval by the Independent Communications Authority of South Africa and
other regulators, to the extent required.
5. CONSIDERATION AND FINANCIAL EFFECTS
Kagiso Media acquired its effective interest in the Kagiso Media/TCT Transaction
and the Makana Transaction for an aggregate of R30m, which it will fund through
the issue of preference shares to a commercial bank. These preference shares
have a coupon of 70% of the prime overdraft rate and are redeemable over five
years.
Kaya and both P4 Cape Town and P4 Durban are trading profitably, and as a result
the directors of Kagiso Media expect the financial effect on Kagiso Media of the
Media/TCT Transaction and the Makana Transaction to be neutral to positive, but
in any event not to be material.
Johannesburg
19 May 2005
Investment Bank and Transaction Sponsor to Kagiso Media
Nedbank Capital
Sponsor to Kagiso Media
Investec Bank Limited
Legal advisers to Kagiso Media
Prinsloo, Tindle & Andropoulos Inc
Regulatory advisers to Kagiso Media
Mahlangu, Nkomo, Mabandla, Ratshimbilani Attorneys
Legal advisers to Makana
Leonard Singer Attorneys
Legal advisers to Tiso
Tugendhaft Wapnick Banchetti and Partners
