The Tribunal ultimately rejected Caxton’s application to intervene in its hearings about the merger between Naspers’ controlled Media24 and Novus, as the issues about Naspers’ control structure were not relevant to the proposed transaction. However, the question remains whether investors should be more concerned about who controls Naspers.
The essential question is whether Naspers’ shareholders are able to exercise meaningful oversight over the company. Caxton believes that the majority of voting rights rest with entities closely aligned to the company and its chairman Koos Bekker. In a sense, Caxton argued, Naspers controls itself.
If this is the case, where does that leave other investors?
“In principle, the public listing of a company’s ordinary shares provides an opportunity for any shareholder who is willing to pay the asking price, to gain a proportionate level of voting rights,” notes Charl Kocks of Ratings Afrika. “And if the company is not performing as well as shareholders believe it should be capable of doing, then a takeover by a party that can improve performance, should be possible. This is one way that management is held to account; for if it does not deliver the goods, it could be replaced by a different set of directors.”
However, the way Naspers is structured, this might not be possible. Caxton argues that there is a controlling block of voting shares that effectively dominates and leaves minority shareholders without any meaningful say.
“This is one reason why the modern view on the listing of non-voting (or low-voting) shares is critical, and why control blocks are the subject of criticism,” says Kocks. “At least when they are apparent, any new shareholder will take them into account before investing; but if they are hidden, they may cause nasty surprises at voting time. As a further concern, hidden control blocks raise uncomfortable questions in respect of the reasons for their secrecy.”
Moneyweb approached a number of asset managers for comment on this issue, but most were reluctant to express an opinion, citing the matter’s sensitivity. It is unclear whether they are engaging with the company in private on the matter, or whether they are simply content to let it slide as long as Naspers continues to perform.
Brad Preston, the chief investment officer for listed investments at Mergence, agreed that the control structures are unclear. However, he points out that there may be both negatives and positives for shareholders in this structure.
