The Mvelaphanda Group (slash Blackstar Group) faces a hurdle in its bid to take full control of Avusa. This comes in the form of opposition from the Public Investment Corporation, which owns 17% of the media company. PIC, the state-owned investment company that for the most part manages government pension funds, told Business Day it was talking to Mvelaphanda about forging an enduring resolution to the beleaguered parent of the Sunday Times.

“We are not supportive of the deal in the current form,” Maqhawe Dlamini of PIC told Business Day. “They need to convince us this is a long-term initiative and we need to know what it is. It’s way too short-term. However, we did say that we are going to engage with management.”

The bottom line for Mvelaphanda is that it needs to gain a 75% acceptance level from Avusa shareholders in order to take control. Mvela currently has a 65% acceptance level. The drive to control Avusa is coming from Blackstar, which in a minnow-swallowing-a-whale manoeuvre bought 28% of Mvela (from Coronation) in January this year. At the time of the transaction, Mvela’s market value was just under R2-billion. Blackstar’s was less than half of that. Mvela called the deal a merger, but Blackstar called it an acquisition.

“When Blackstar initially acquired the 28% of Mvela Group from Coronation, one of the assets we were most interested in was Avusa,” Mvelaphanda’s interim CEO Andrew Bonamour told Alec Hogg, who was hosting the SAfm Market Update with Moneyweb. 

“It was a business that had lost its way, that wasn’t capitalising on what we regarded as the content. So we believed that, given our track record, with the likes of Litha Healthcare, etc, that we could play a role in what we could probably call a catalyst, just to put the business back on to a sort of growth path.”

Bonamour, in his early 40s, is a former Brait man. If you read the Sunday Times, you may remember a story on how he was mentored by Mark Barnes at Brait and Purple Capital, before the aspirant global equity man jetted off to London to start Blackstar. 

The new venture Bonamour founded bought some unsexy timber and coatings businesses, but sold them for decidedly sexy returns. What Bonamour’s experience shows is that he knows how to spot and extract value from businesses in commodity type markets with a strong business-to-business, or industrial, bent.  

When Sunday Times spoke to Bonamour, he had a pile of Avusa reports on his desk. Not very subtle, but you’ve got to know his mentor to appreciate that. Barnes is a man’s man. A tough-talking, straight-shooting investor who was infamously ejected as the CEO of Brait in the equity company’s early days. 

More recently he founded financial services and investment group Purple Capital, which is listed on the JSE. Described as harsh but brilliant, there was a time when Barnes would walk into corporate boardrooms and directors would tremble, although nowadays he calls himself “previously rich and famous”. Barnes is a bit of a libertine, the kind of man who’d put risqué nudes at the entrance to his home and not give a damn about what you’d think.

This is what separates the mentor from his protégé. Barnes is battle-scarred and wiser, Bonamour has yet to really taste the crushing humility of defeat. But, like Barnes, Bonamour has aspirations for a listing of his own, and sees Avusa as a means of gathering critical mass to do just that. But first he has to get past PIC. 

The second job is to get Avusa working and the man who has been entrusted with that genuinely difficult task is Colin Cary.

“Colin built Hirt & Carter from a small printing business to kind of what we regard as quite an advanced 21st-century business in that they control and own a  lot of content that they basically share with the retailers,” Bonamour told SAfm/Moneyweb.

“Our view is, if you look at the newspapers, they’ve still a long way to go in this country. And the various other divisions that Avusa has, and all the content they actually own – that’s sort of not being used through their different mediums,” said Bonamour, who appears to be well aware of some of the problems at Avusa.

“On the books side, I think they’ve made some fundamental errors. They went and spent R30-million on an e-book site. Effectively, you are trying to compete against Amazon.” 

If you’re pausing and taking a deep breath, don’t worry. You’re not alone. Avusa has made some disastrous decisions in the online space, R30m e-book site aside. Will Cary be the right man to turn that all around?

Now there’s little if anything to be dug up on Cary. It appears that if you want to know the man, you need to look at the castle he’s built. And, as far as printing businesses go, the Hirt & Carter group is pretty smart. The company was founded by Cary in 1964 and could have become something of a dinosaur. Instead it took the high road by forging a business model based on integrated digital technologies and bespoke software solutions to deepen client “lock in”. This means the group has enjoyed long-term contracts with retail clients of the likes of Spar (for over 30 years), Shoprite (for close on 20 years), Clicks (just over 15 years) and Mr Price (for close on 15 years). 

Then there’s the fact that the business Cary built contributed R493-million to Avusa for the last financial period, in just five months, exceeding expectations.

Market critics say Cary still has to prove his media mettle, but his ability to grow a print business from scratch into a soup-to-nuts operation driven by digital technology and homegrown software solutions speaks volumes. Cary could do much to help Avusa address legacy businesses in their entertainment and book divisions, without doing something foolish like spending R30-million on an e-book site.

Although Naspers’ Koos Bekker may deem Cary too old to reinvigorate Avusa’s digital business (Bekker once famously indicated that anyone older than 35 years was obsolete in internet terms), the Hirt & Carter founder could have the insight to liberate the resources required to get Avusa’s digital assets moving in the right direction.

To date, Avusa’s converged business has been a sad affair, what with a handful of digital news offerings, INetBridge, Junction.co.za, MapIT, Amorphous and Exclusives.co.za. At the very least the media company should have done a little more than throw money at clumsy market entries like Zappon, which folded late last year.

It might seem unfair to mention Naspers and Avusa in the same story, let alone compare them, given that through Multichoice the business that Bekker built is looking a lot more like Google in emerging territories, and earning billions in revenues too. But it bears remembering that Avusa was born out of Johnnic Communications (Johncom) which at one time had a multi-billion rand stake in MNet and Supersport. The interests in those cash cows were sold to Naspers, which put them to good use, in part by using the funds they generated to pursue a strategy of investing in internet and mobile assets in developing markets.

But let’s not wade too deeply into past disasters and stories of how Avusa’s management at the time enriched themselves at the expense of the media company. Instead, let’s look to the future. Mistakes have been made but Cary might just be Bonamour’s man to turn things around. Bonamour’s already stated he wants Cary to shake things up in a business that’s become complacent, lost focus and become fat  around the middle.

Entrenched self-interest and management by shareholder committee has proved disastrous for Avusa, but the Hirt & Carter acquisition that Mvelaphanda resisted for so long might prove to be the media company’s saving grace. If Cary can deliver on Bonamour’s ambition, then Avusa might just become the Titanic that retreated from an iceberg to sail off into a new horizon. But the jury will still be out for a long time. DM

Read more:

• Avusa takeover, harbinger of mediascape’s change? at Daily Maverick 
• PIC raises objection to Mvela’s Avusa bid at Business Day
• Mvela’s bid for Avusa is no garage sale on Moneyweb