Kagiso-Juta deal ‘makes sense’

Trevor Neethling 

Kagiso Media’s share price tumbling more than 5% to R17 last week after it announced a plan to buy Juta, SA’s oldest publishing firm

WHAT do radio stations and academic textbooks have in common? Very little, some would argue — resulting in Kagiso Media ’s share price tumbling more than 5% to R17 last week after it announced a plan to buy Juta, SA’s oldest publishing firm .

But the move is not all that surprising, said Afena Capital’s head of research, Khulekani Dlamini. "For Kagiso it is all about managing the content process. Adding Juta will mean it will own the content generation , content aggregation and content dissemination even if it is to a particular market. This is essentially what any media company is about."

The business of academic publishing is not totally foreign to Kagiso. One of its first acquisitions was LexisNexis Butterworths, a specialist academic, professional and business publishing and information service.

Kagiso sold its 50% interest in the LexisNexis joint venture for R565m to publishing company Reed Elsevier SA in October.

Mr Dlamini said the Juta bid had the potential for high margins as the academic book publishing business had low volatility.

Avior Research media sector analyst Richard Tessendorf said Kagiso’s bid was a sound strategic fit due to its publishing experience, although legal publishing was somewhat different to academic textbook publishing.

Kagiso has stated its intention to become less reliant on advertising income.

It is clear that media companies have to look at generating new revenue streams to supplement falling revenue from once very prosperous operations.

For Naspers this has come in the form of continued acquisitions in digital media platforms, especially after the success of its stake in Chinese internet company Tencent Holdings, which it acquired in 2001.

For Avusa , the acquisition of printing company UHC (now Retail Solutions) this year proved a financial lifeline. Were it not for the profit generated from it, headline earnings per share would have been even more dire than the near 90% drop it registered.

Mr Tessendorf said acquisitions outside the major media companies’ core business do offer a degree of stability. "They are very exposed to the seasonal business cycles, so these acquisitions do offer some sort of stability."

Mr Tessendorf said no other major acquisitions for SA’s listed media companies were on the cards for the immediate future.

He said that both Naspers and Caxton had indicated a focus on internal growth, while Avusa would have limited appetite for new deals after the debt it incurred on the Retail Solutions acquisition.

But Kagiso’s bid for Juta proves that despite the economic environment, there is always room for a good deal.