Novus’s Media24 deal up in the air
Shareholders wait with bated breath for verdict after CEO’s death
The death of former Novus Holdings CEO and chairman Lambert Retief has created uncertainty about one of the company’s most important printing contracts. Although Retief resigned from his executive position years ago, he continued to play a central role in Novus through a management agreement with Media24.
That deal set the terms of the relationship between Novus (previously Paarl Media Group), Media24, which owns 66% of Novus, and Retief for decades. It is now set to be rewritten.
At stake is Novus’s single most valuable contract, the printing of all Media24’s newspapers and magazines. About 31% of Novus’s annual revenue comes from the contract, which industry sources say is on terms that are favourable to Novus.
A statement issued ahead of Novus’s 2015 listing, said the printing deal could only be terminated if the management deal between Novus, Media24 and Retief was terminated.
Last Thursday, just after announcing Retief’s death, Novus informed shareholders that the management deal "has terminated upon Mr Retief’s passing on Wednesday, 25 January 2017". This was the first time minority shareholders were made aware that Retief’s death could trigger termination. The prelisting statement merely said the deal had "indefinite duration and is expected to continue for the foreseeable future."
Novus confirmed last week that Media24 had the right to terminate the printing agreement on six months’ notice.
"Novus Holdings and Media24 are currently engaged in negotiations around the renewal or extension of the printing agreements and are in the process of finalising new terms," said Novus.
Media24 CEO Esmare Weideman dismissed one analyst’s suggestion that Media24 would use the opportunity to abandon printing some of its titles and focus on online versions.
"With regards to the digitisation of our publications, we have an excellent portfolio of printed newspapers and magazines and online properties. Print remains very much part of our future," said Weideman.
For Novus shareholders, the uncertainty around the Media24 contract comes on top of uncertainty about the contract to print educational workbooks for the Department of Basic Education.
This is the largest contributor to Novus’s books and directories business. In its financial 2015 results, management referred to the renewal of the tender, due at the end of calendar 2015, and said it was reasonably confident of "continued involvement".
Novus was awarded the tender in early 2016, but it was cancelled by the Treasury due to concern over irregularities in the process. Novus continued to print workbooks on an emergency basis during 2016.
Novus has not informed shareholders what progress had been made in issuing a new tender. Minority shareholders are also waiting to hear of the outcome of the engagement with the competition authorities following the intervention of Caxton, which claimed the listing of Novus represented a change of control that had to be approved by the authorities.