Iqbal Survé’s Everest: Independent Media hits back at Sagarmatha doubts

JOHANNESBURG — Watching the likes of Independent Media’s Cape Times aggressively defend the planned listing of Sagarmatha on the JSE is enough to make one wonder. Apart from the fact that Iqbal Survé is clearly using his newspapers as a mouthpiece to promote and defend Sagarmatha, there are serious doubts about the substance of this planned listing. Also, having been a technology journalist myself for around a decade, I find it very difficult to believe Sagarmatha’s claims that it will become the next Naspers or Google of Africa. The question I have is what innovation, intellectual property or technology business does Sagarmatha actually own or possess which will make it a so-called ‘unicorn’ as it claims? Ultimately though, it’s up to the market to decide whether Sagarmatha’s listing will get off the ground or not. – Gareth van Zyl

By Donwald Pressly*

Independent Newspapers has lashed back at AmaBhungane – an investigative journalism unit which was born out of the Mail & Guardian – which suggests that Iqbal Survé, its owner – is making an “outrageous attempt” to use other people’s money to plug a R2.3 billion hole in his media balance sheet. IOL, the Independent’s web platform, has cried foul-play reporting by Amabhungane.

Amabhungane reported that on March 28, Sagarmatha Technologies LTD – the new company which is named after the Nepali name for Mount Everest – invited selected investors to subscribe for a “private placement” of shares ahead of a planned listing on the Johannesburg Stock Exchange.

But on Friday, IOL reported that Sagarmatha – which is 75 percent owned by the Surve family – had pushed back the announcement of its private placement results, which had been set for that day, 6 April.  It also reported that it would now list on the Johannesburg Stock Exchange on Friday April 13 and not April 11 , Wednesday, as had been previously stated.

Iqbal Survé, head of Independent Media Group.

IOL reported that the anticipated market capitalisation of the company would be some R49.7 billion “based on more than 1.2 billion shares in issue at a placement price of R39.62 per private placement share”. It reported that the JSE had granted Sagarmatha Technologies approval for a listing of up to 1 214 718 441 shares in the media sector on its main board.

Sagarmatha itself reported that it aimed to raise R7.5 billion in the private placement of 189 million shares.

The reason given for the amendments to the salient dates and times relating to the listing is due to a request from potential investors to extend the closing date of the private placement, IOL reported.

But this is not how it is seen by AmaBhungane.

It reported: The full extent of the destruction at Independent Media since the Public Investment Corporation placed the company at the disposal of Survé has been laid bare – ironically via Survé’s outrageous attempt to use other people’s money to plug the R2,3-billion hole in his media balance sheet.

It reported that it looks like “a desperate attempt to save Independent, which will be incorporated into Sagarmatha if the private placement attracts enough money”. Survé was seeking to raise a minimum of R3-billion via this private placement despite the fact that the company he’s selling is technically insolvent and labouring under the burden of some R2,3-billion in debt.

AmaBhungane reported that the situation was “dire” because Survé needed to find R863 million by August this year to replay loans to the Public Investment Corporation (representing the Government Employees Pension Fund) and a Chinese state consortium. They co-funded his acquisition and development of Independent Newspapers – which he bought from the Irish O’Reillys at the end of 2013. Sekunjalo Independent Media owns 55 percent of Independent Media. Independent is the rump of the old Argus newspaper group, and was sold to Sekunjalo in 2013 for R2 billion. It was mainly debt-funded.

Read also: James Myburgh: How independent is Surve’s Independent with R900m PIC debt?

AmaBhungane reported that the funds from the Government Employees Pension Fund – which represents the retirement interests of policemen, teachers, nurses and state doctors – drew criticism “for making an investment driven by political considerations rather than returns for government employee pensions”.

A particularly telling piece of information reported by the investigation unit is that the interim financial information disclosed by Sekunjalo Independent Media reveals that, as of 30 June 2017, SIM had accumulated losses of R752-million and that the company’s total liabilities exceed its assets by R547-million.

In the 2013 deal, AmaBhungane reported that the PIC took 25 percent of Independent, as well as funding Survé. The other 20 percent of Independent was picked up by a consortium consisting of the China Africa Development Fund and China International Television Corporation.

Read also: Revealed: PIC lent R1bn to Iqbal Surve – here’s full list of beneficiaries.

Investigative journalist Sam Sole noted that the deal was veiled in secrecy at the time – as were the subsequent fortunes of the group, though plunging circulations, staff retrenchments, resignations and allegations of asset-stripping suggested managing the purchase debt was always going to be a challenge.

Independent says that the AmaBhungane reporting is a whole lot of hogwash.

The official response was:

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.

Referring to Independent’s debt, IOL reported that the company was “actually ahead of its scheduled payments 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. It acknowledged that as a private company it was not bound to publically disclose its financials.

It acknowledged that its listing – and Sagarmatha Technologies acquisition of Independent Media – would change this. It did not respond to AmaBunghane’s reporting of the interim results of SIM, which would imply that they are correct.

IOL reported that Sekunjalo and Independent Media did not have to repay the 50 percent portion of its loan from the PIC/GEPF until September this year – 2018 – but it had chosen to accelerate repayments. It did say that it was a myth that the PIC loaned more than R2 billion to Independent Media. “This is a gross misrepresentation of the facts,” IOL said. “The PIC originally had a combimed investment and loan of R1 billion of which R150 million was repaid early on.

The sting the the tail from IOL’s reporting was that this amount of R1 billion was “far less” than its transactions with the likes of Tiso Blackstar (formerly the 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 of, or at the very least, critical examination of the leadership?”

IOL reported that 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. It said the AmaBhungane reporter “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?  

Readers must make up their own minds about who is exaggerating, who is being unfair by reading the IOL response to AmaBhungane in full. The IOL response begins tellingly:

South Africa, we have a problem. There is a move afoot in the country that is potentially far more dangerous than the Guptas’ attempted takeover of the country, and that is media manipulation and unethical reporting designed to prevent broader economic participation.

It goes on: “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.”

The Messenger alerts readers to the original investigation by AmaBhungane and the response from IOL, representing Independent:

IOL also sent out this story on Friday:

  • Donwald Pressly is the editor of Cape Messenger.
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