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The sale of Gupta-owned company Oakbay’s media interests to Mzwanele Manyi for a total of R450m, which is to be entirely vendor financed, is unlikely to keep the Guptas out of the loop.
At face value, it means that Oakbay will be receiving substantial repayments for some time related to its 35% stake in Infinity Media Networks, which owns the ANN7 television channel, and 66% in TNA Media, owner of The New Age newspaper.
Manyi told City Press that the companies’ arrangement with their landlord would remain intact. He was buying the shares “as is”, he said, when asked about who retained ownership of the premises of ANN7 and The New Age.
That landlord is Islandsite 180, the Gupta family’s property company which owns the premises of the New Age and ANN7, as well as three properties in Saxonwold and valuable properties in Cape Town and Durban.
The announcement of the sale was quickly followed by another divestment announcement – the family was selling its contentious coal company, Tegeta.
This includes the Optimum coal mines at the heart of the allegations about state capture at Eskom. An impeccable source close to Tegeta’s 2015 takeover of Optimum from Glencore said Eskom has massive leverage over the planned sale announced this week due to Optimum’s contract to deliver 5.5 million tons of coal to Eskom per year.
Reinforcing the apparent Gupta disappearing act was Friday’s public announcement by Denel that it had ended its involvement in a joint venture with Gupta-linked VR Laser. Denel Asia had represented Denel’s 51% stake in the partnership. Denel and Treasury have been at loggerheads about the venture.
HEFTY PRICE TAG
Manyi disputes the reports this week that he massively overpaid for the media companies.
According to Oakbay, he paid R300m for Oakbay’s 35% share in Infinity (ANN7), which values the company at R857m. However, Business Day reported on a valuation done on ANN7 two years ago which allegedly put the entire company’s value at only R52m.
This was a misunderstanding, said Manyi.
“Where that comes from is when a minority shareholder wanted to sell their stake and the price was R50m. That has confused people.”
Manyi is paying R150m for Oakbay’s “two-thirds” shareholding in TNA Media, valuing the company at R225m.
The prices given by Oakbay imply that ANN7 and The New Age are worth altogether almost R1.1bn.
The only public indication of the two companies’ income comes from the annexures the Guptas attached to their court papers early this year in the fight against former finance minister Pravin Gordhan’s court application over the Guptas’ banking woes.
These include letters from auditors SizweNtsalubaGobodo meant to illustrate that the Guptas’ companies make most of their money from private sector clients, not from the state.
To this end, the letters show the following revenues of each of the major Gupta companies up to the financial year ending 28 February 2016:
. The New Age had revenue of R203.6m, of which 56% came from public sector clients.
. ANN7 had revenue of R216m, practically all from private sector clients. The network only started in 2013 and has likely grown since then.
Manyi said he first approached Oakbay about buying the media assets eight months ago, at the beginning of this year.
“There was this toxicity around the assets, even though they are quality assets,” he said.
“I am a strong proponent of media diversity. It would be a shame if South Africa loses this mouthpiece. I approached the Guptas about these assets.”
The corporate world’s shunning of the Gupta family meant that the family had to exit completely, he said.
“For me the business plan is not to do a normal BEE deal for 20% or 26% or whatever. You had to get them out completely. This is going to be my retirement. I am in this job forever.”
The New Age has a major minority shareholder in the form of Bennett Coleman and Company, a major Indian publisher.
WHO OWNS ANN7?
Oakbay explicitly announced the sale of its own 35% of ANN7. That leaves the 35% owned by Indian partner Essel Media and the staff share of 9%.
Importantly, nothing has been said of Mabengela Investments, which owns 21%. Mabengela belongs mostly to Duduzane Zuma (45%), but Rajesh Gupta owns 25% of it – hence another 6% indirect stake in ANN7.
Through Mabengela, other indirect shareholders include Aerohaven Trading and the Dubai-based Fidelity Investments.
Tageta sale is also suspect
The Gupta family’s second major divestment, announced this week, faces some major hurdles, with Eskom and Treasury taking a keen interest.
The family’s coal business, Tegeta Exploration and Resources, will be sold to alleged Gupta frontman Amin Jaffar Abdulla al Zarooni for R2.97 billion.
A source close to the recently appointed Eskom board said the sale would have to get the green light from the state-owned company’s board. “What if they sell to somebody who cannot even mine? That could threaten coal supply.”
The source said the sale could have been prompted by Treasury’s decision early this month to appoint a service provider to investigate how Eskom awarded Tegeta coal contracts.
“You can’t be 100% sure about these things, but there are too many things wrong with those contracts. The likelihood is that after the investigations, Treasury will seek to have them cancelled.”
A senior executive at Treasury said the Guptas’ decision to sell Tegeta would not stop the forensic probe. “We were busy evaluating tenders, and I think we will appoint a company by September 1.”
Oakbay said it expected to clear regulatory requirements within 12 months.
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