This is Independent Media’s response to this analysis by amaBhungane’s Sam Sole, published in Daily Maverick.
The most important point we would like to make here is that we, as Independent Media and Sagarmatha Technologies Limited, have nothing to hide. We have been consistently transparent. What worries most of our media competitors – our main detractors – is that we have identified the future of media and have constructed a Multi-Sided-Platform (MSP) that will make traditional media houses obsolete. They are fighting for their existence.
Before we address the blatant untruths in the recent amaBhungane so-called “exposé” that attempted to question the pre-listing statement of the company due to list on the JSE, let us discuss journalist ethics in this country.
How is it that journalists now feel they have the right to undermine a listing of a competitor, by approaching international investors and interrogating the intelligence of their investing in Sagarmatha, a process that can only be described as an attempt to determine the outcome for their own favour? Or, journalists contacting assets managers in South Africa and international valuation houses, to sway them with their uninformed rhetoric – again for their own advantage?
This is a dangerous move – not only for these journalists and the publications they represent but for the country as a whole. This is in effect, tantamount to dissuading international investment from entering South Africa, at a time when the country is actively pursuing capital injections to counter the years of negative growth.
Media has the inalienable right to contact whomever they wish, of course, to understand the business/story they are working on and to get comment. But, to actively seek to sabotage the deal because of a personal grudge or because their own businesses stand on the edge of extinction, is in our mind, highly unethical.
An untransformed media landscape still exists in this country, so there is a lot riding on Sagarmatha’s listing. It will change the face of media in South Africa and the continent, forever.
So, let us put the facts out there:
Sam Sole is not a financial journalist. That is evident in the factual inaccuracies contained in the so-called ‘analysis’ piece published this past weekend. He has condensed a 212-page document into essentially five steps. This leaves a lot open to interpretation and misrepresentation.
Secondly, it is hardly an investigation, given that the information is in the public domain and that we were never once contacted for our comment or insight or to check the facts of this article. Why not we wonder?
The article focuses on Independent Media – it does not set the landscape for the reader to understand the bigger picture. Independent Media makes up less than 5% of the Sagarmatha Technologies value proposition.
The investment into Independent Media is a private equity transaction, this is what Sam Sole has missed completely. Like all deals of this nature, anywhere in the world, value is built over time. Eventually, the value creation is greater than the cost of capital.
The debt – Independent Media is actually ahead of its scheduled repayments to the PIC/GEPF, having already made a sizeable capital repayment early in the investment phase. It has also serviced interest payments to its other minority shareholder, Interacom, amounting to over R380-million.
But, as a private company, it is not bound to publicly disclose its financials. The Listing and Sagarmatha Technologies’ subsequent acquisition of Independent Media, changes this.
Although there was no requirement to pay the 50% of the loan until September 2018, Sekunjalo and Independent Media have accelerated repayments.
Another myth the Daily Maverick and others have been peddling over the past few years, is that the PIC loaned more than R2-billion to Independent Media. This is a gross misrepresentation of the facts, which are: the PIC originally had a combined investment and loan of R1-billion, of which R150-million was repaid early on, which is far less than its transactions with the likes of Tiso Blackstar (formally Times Media Group), Caxton, CTP and even Naspers. If an investment into a company whose share price had plummeted to the extent that Tiso Blackstar now finds itself facing, surely that would result in the dismissal or at the very least, critical examination of the leadership?
Independent Media carries no bank loans. All of its debt is to shareholders who have a vested interest in the long-term success of the business. Mr Sole conveniently ignores the fact that many media houses in South Africa share the same investor grouping too – in that vein then, these other media houses should also be tarred with the same brush of misusing pensioners funds, surely?
Sekunjalo has put up all the money to modernise what was essentially a legacy media house when it took over Independent Media. Through the money that Sekunjalo has injected into Independent Media, the company has paid for its own printing presses in KZN and Gauteng for example. This gives Independent Media control over its own production processes – not reliant on third parties. This is the value that has been added by Sekunjalo after the previous owners disbanded the printing operations in Johannesburg.
Independent Media has in fact now grown in value due to what Sekunjalo has put into growing the technology platforms that underpin Sagarmatha Technologies. Sekunjalo has funded these improvements for the benefit of all the investors and shareholders and, for the employees who work within these structures.
The reality is that Independent Media has benefited at no cost to anyone else other than Sekunjalo who has solely invested in the modernisation of the business. It has moved from a legacy print business to an advanced content technology business that consistently wins global awards for its innovation.
The other reality is that all media houses are battling with declining revenues. That’s not a secret either. The difference here is that Independent Media has jumped on the super-galactic highway and has managed to re-engineer itself to take advantage of technology and the fourth industrial revolution. Should that not be lauded?
Flow to the family
Once again, everything is fully disclosed in the PLS – a public document written with investors in mind, and something that therefore talks in a language that the financial community inherently understands. But, let’s take one point as an example. The interpretation by amaBhungane seeks to paint the Survé family as self-serving when it allegedly sells itself shares at a discounted rate and makes poor old Independent Media pay a lot more.
The truth of the matter is that this issue of shares to Independent Media was due to an internal restructure in preparation for a future listing as fully disclosed in the pre-listing statement. Far from the Survé family benefiting, the outcome is that Independent Media, without any payment, now owns 40,000,000 shares in Sagarmatha Technologies which are worth R1.575-billion post listing, as per the Redwood valuation, which by any account is a very good return for an “insolvent” Independent Media.
If the journalist in question or his contacts understood financial reporting they would have identified that the “Treasury shares” referenced in the PLS are in fact owned by Independent Media and on a standalone basis, “not consolidated basis” – Independent Media is very much solvent. That is the value created by Sekunjalo.
South Africa’s economy has been built on mining – it’s physical and tangible. This is a legacy of it being a closed economy through the apartheid years. Old habits die hard it would appear, as this narrow-minded approach and recalcitrance to understanding platform businesses and new paradigms is hampering our ability as a country to go where other developed and emerging markets are already playing. Much of our financial and media sectors are operating in a comfort zone that will ultimately punish us as Africans if we do not adjust our thinking in line with what is currently happening across the continent and in the rest of the world. The world has moved on from brick and mortar businesses, do we wait for Western or Asian companies to lead the way in Africa, or do we as Africans make the first step? Let’s transform our minds, we must control our own destiny.
The media’s questioning the integrity of one of the world’s most respected valuation firms that has performed countless valuations conforming with US Securities and Exchange (SEC) filings, and, which was put through stringent JSE review, along with the requirements set down by the JSE, doesn’t do much to build trust in South Africa.
All of this could have been so easily explained, had anyone bothered to have picked up the phone or sent an email. Independent Media and Sagarmatha Technologies are more than willing to address questions pertinent to the listing from the information that is contained in the PLS. It may not, however, discuss anything not contained in this document, because of a closed period – the same rules that apply to any other company in this position.
To reiterate, Mr Sole did not have the decency to offer Independent Media or Sagarmatha Technologies the opportunity to respond. In the world of fake news, the most basic requirement for journalism to survive is to fact check.
Not having done so, and only selecting certain components that have been left open to misinterpretation, is a travesty of reporting. So, what is Mr Sole and the Daily Maverick’s agenda? DM
Photo: Iqbal Survé (Photo: WEF)
"If I have seen further it is by standing on the shoulders of giants" ~ Sir Isaac Newton