Johnnic Communications confirms it is selling its 38.56% stake in M-Net and SuperSport to Naspers for around R3.145 billion, as Naspers seeks to consolidate its holdings as television enters a new era.
Naspers says it makes sense to consolidate M-Net and SuperSport's interests as television migrates from analogue to digital, high-definition television enters the marketplace and competition heats up.
In a statement to shareholders yesterday, Naspers says these factors "will increase costs and capital expenditure", resulting in the decision to consolidate the assets.
"Looking forward, the introduction of several competitors, coupled with the recent weakening of the rand relative to the US dollar, is expected to drive up M-Net/SuperSport's programming costs. This will cause turbulence and affect profitability over the next few years."
'Makes sense'
An analyst previously commented it would make sense for Naspers to buy out the M-Net and SuperSport shares it does not already own.
"I wouldn't be surprised if they [Naspers] want the other 40%," said the analyst, who asked not to be named. He added Naspers must be aware of the fact that originators of content - such as M-Net - are going to be more valuable in an era of convergence.
"Strategically, it makes sense, but it always boils down to at what price [Johncom will sell]," he noted previously.
Analysts have valued M-Net at just over R8 billion, and place M-Net's holding at about 40% of that, or R3.3 billion.
Naspers, which indirectly and directly owns 60.12% of the subscription television service, will pay for the stake through a combination of 20.9 million shares and R250 million in cash.
Positive reception
Johncom estimates the price of its stake at R3.145 billion, based on Naspers' closing share price of R138 on 10 November. Shortly after the announcement, Naspers' shares traded at R146.99.
Naspers' shares closed the day at R146.65, up from Monday's close of R142.99. Its 12-month high is R148.50 and its 12-month low is R97.43.
Johncom's shares also responded positively, closing at R73.89, up from Monday's close of R70.78. Its 12-month high is R75 and its 12-month low is R45.25.
After the transaction, Naspers will have an effective 98.7% stake in M-Net and SuperSport, which will become subsidiaries. Naspers indicates the pro forma financial effects show headline earnings per share will move up 8%, to 790c from 729c.
Johncom says its headline earnings per share would drop 40%, to 291.8c from 485.8c.
The transaction is subject to several conditions, including acceptance by Johncom's shareholders and approval by regulatory authorities. The last of these approvals must be received by 13 November 2007, says Johncom.
M-Net currently delivers its service through analogue terrestrial and digital satellite distribution. "The existing analogue system, which broadcasts the main M-Net entertainment channel and Community Services Network channel, has been in operation for 20 years and is rapidly becoming obsolete," it says.
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