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Desai a marked man


IS PRAKASH Desai, the latest in Avusa's long list of CEOs, a marked man?

The last Avusa [JSE:AVU] boss who stood in the way of shareholders was former CEO Connie Molusi, who took on Allan Gray and Coronation Fund Managers [JSE:CML] over the sale of Avusa's 38.6% stake in television channel M-Net/Supersport.

You only need to look back to 2006 to Molusi's departure to see what happens to such CEOs. 

The fact of the matter is that there's a schism at the heart of Avusa - and something has got to give.

Either Mvelaphanda Group [JSE:MCG] is to divest of the company, or management goes. We think the latter.

Mvela ate humble pie on Tuesday and said it would not oppose Avusa's R925m acquisition of Universal Print Group and UHC Communications (UHC). But it still stuck to its line about the deal not being "beneficial" to Avusa, albeit in a less harsh tone, saying it would be "value neutral".

Over and above this commotion, there's the very real criticism that while Avusa ploughs more funds into print-related businesses, its rival - Naspers [JSE:NPN] - continues to make hay in the digital world unchallenged by a South African firm.

It is ironic that on the day Avusa heads off a shareholder revolt, Naspers' share price should scale new heights on the back of expectations that its Russian gambit Mail.ru plans to list in London.

Mail.ru reminds us of Tencent, the Chinese social networking site 35% owned by Naspers. Bought for a pittance in 2001, Tencent is Naspers' most profitable operation.

Tencent is worth over $320bn on the Hong Stock Exchange, while Avusa has shrunk to a R2.2bn market capitalisation.

Mvela's major complaint with the UHC acquisition is that it adds nothing to Avusa's internet or media strategy, while the magazine and brochure printing business it operates is in terminal decline.

That Desai has since June (when the UHC deal was first proposed) failed to convince Mvela of any value in the UHC acquisition may only be an indicator of how he is viewed by his major shareholder. He is being regarded with suspicion and with not much confidence.

"It took the UHC vendors to convince the Mvela guys of any possible value, not Avusa's management," said a source close to the process.

Another told Fin24.com: "It is not as if the issue of Desai's future has not come up for discussion."

Last Thursday, Desai hopped on a plane to Durban and said he was going down there to "appease" the UHC vendors as the media spotlight on the transaction had the potential to make them nervous.

That "appeasing" may only have been the beginning of many more such gestures to come. But with the hindsight of Avusa's CEO history, Desai's days may be numbered.

Victory at this Thursday's shareholder meeting would only serve to win a battle. The war is still ahead.
 
 - Fin24.com
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