It may make sense to merge and Kagiso Media.
Are the two Rupert family controlled companies Remgro and VenFin plotting the formation of a new media giant with their respective empowerment associates?
That issue was raised earlier this month on – Finweek’s new online publication – and in editorials on two recent transactions.
The deals in question involve Remgro acquiring a major 37% stake in Kagiso Trust Investments (KTI) and KTI bolstering its stake in Kagiso Media to 48,21%.
Remgro’s stake in KTI gives it a sizeable holding in Kagiso Media, which will rank as the group’s sole media asset, if a small holding in Caxton is ignored.
VenFin, Remgro’s TMT laden corporate cousin, holds a significant minority stake in free-to-air television station Ven- Fin also has a close business association with Hosken Consolidated Investments (HCI), the controlling shareholder in
Now with both Remgro and VenFin fond of super-sizing their investments i.e. merging current investments into bigger, more competitive entities – there must be a compelling case for facilitating a merger between Kagiso`s mainly radio assets and HCI’s TV assets.
Of course, that’s easier said than done. Top media analyst Peter Armitage says that there would be only a 5% chance of such a merger in the next year. “But over Plotting a new media giant with VenFin? Johann Rupert, chairman, Remgro the longer term, there’s no reason why something like that couldn’t happen.”
Getting the respective management teams to agree to such a merger would be a tough ask, both having notched up considerable success of late.
Another major issue in such a corporate development would be the relative valuations of unlisted against listed Kagiso Media.
Kagiso and HCI’s media assets, including radio station YFM (R575m), have similar turnovers of R527m and R575m respectively, making for a media conglomerate with a turnover of more than R1bn.
HCI’s media assets reported R131m in net profits in the year to end-March 2005 (excluding a deferred tax asset of nearly R300m), while Kagiso managed net profits of R 103m in the year to end-June.
The businesses also complement each other, not only in electronic media assets but also in their respective growth phases. On the one hand, Kagiso’s radio assets are stable cash generative businesses happy to fork out dividends in the absence of major acquisition opportunities. On the other hand, looks an exciting growth phase, with plenty of opportunity to expand its format.
An enlarged media business would also have the benefit of being controlled by four cash flush investment trusts, which thanksto genuine empowerment credentials – could open the way for aggressive expansion into new media formats.
The deregulation of SA’s broadcasting sector could be a massive opportunity for a cash-flush contender. KTI has already signalled its intention to gain outright control of Kagiso Media, earlier this month spending R80m to buy back shares owned by filmmaker Anant Singh’s Videovision group.

Source: Finweek – Marc Hassenfuss