{"id":4292,"date":"2016-06-06T00:00:00","date_gmt":"2016-06-06T00:00:00","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/stories\/guptas-media-bid-rebuffed\/"},"modified":"2016-06-06T00:00:00","modified_gmt":"2016-06-06T00:00:00","slug":"guptas-media-bid-rebuffed","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/guptas-media-bid-rebuffed\/","title":{"rendered":"Guptas’ media bid rebuffed"},"content":{"rendered":"

Craig McKune & Tabelo Timse
\n<\/em>Picture: Iqbal Surv<\/em>\u00e9 – David Harrison, M&G<\/em><\/p>\n

The Public Investment Corporation (PIC) is trying to block a bid by President Jacob Zuma\u2019s friends, the Guptas, to take a dominant stake in Independent Newspapers.<\/p>\n

The deal would make the Guptas’ Oakbay Investments the largest shareholder of one of South Africa\u2019s most important newspaper companies. Independent publishes leading regional newspapers such as the Cape Times<\/em> and The Star.<\/em><\/p>\n

But the Guptas have accused PIC chief executive Dan Matjila of being \u201cbiased and ill-advised\u201d.<\/p>\n

This seems to indicate a hardening of attitudes around the Gupta family, who have been publicly accused of using their proximity to Zuma to \u201ccapture\u201d the state.<\/p>\n

The finance minister appoints the PIC board in consultation with Cabinet. PIC\u2019s chair is deputy finance minister Mcebisi Jonas. The ministry is widely considered to be the scene of a tense standoff between Zuma and Finance Minister Pravin Gordhan, although the presidency denies this.<\/p>\n

The details of the Independent dispute are before the high court in Pretoria, where the Guptas are suing to wrest control of the\u00a0 group from its chairperson Iqbal Surv\u00e9.<\/a><\/p>\n

Guptas’\u00a0“value add”<\/em><\/strong><\/p>\n

Surv\u00e9 led a consortium that bought Independent from its Irish owners for R2-billion in 2012. Supported with loans from the PIC, Surv\u00e9\u2019s consortium took 55%. A consortium of\u00a0 Chinese state-owned companies bought\u00a0<\/a>20%, and the PIC bought the remaining 25%.<\/p>\n

But it was never disclosed that Surv\u00e9 granted Oakbay an option to acquire half of his consortium, amounting to 27.5% of Independent itself. This would be bigger even than Surv\u00e9\u2019s stake as he shares his half with others. This is revealed in\u00a0 court documents<\/a>.<\/p>\n

The sheer size of the once-secret Gupta stake indicates they held substantial power when they negotiated the pact with Surv\u00e9 in November 2012.<\/p>\n

Asked about this, Surv\u00e9\u2019s lawyer Adam Ismail said there were two reasons for including the Guptas. The first was that experienced newspapermen Nazeem Howa and Moegsien Williams, who were key players at the Guptas’ The New Age media group, would bring a \u201cvalue add\u201d at management level.<\/p>\n

The second was that the Guptas would help Surv\u00e9 to finance the Independent buyout. They never did, he said.<\/p>\n

According to documents before the court: \u201cOakbay duly exercised the option in writing on 23 August 2013.\u201d<\/p>\n

But Surv\u00e9 kicked back,\u00a0 telling Bloomberg<\/a> the following month that he had \u201crebuffed an approach by the Gupta family\u201d.<\/p>\n

“Anticompetitive behaviour”<\/em><\/strong><\/p>\n

From there, amaBhungane understands, the Gupta-Surv\u00e9 dispute was argued in a secret arbitration, which Surv\u00e9 lost. But before the Guptas could take up their stake, there remained some legal hurdles.<\/p>\n

One was a dispute over how much the Guptas should pay. This decision was handed to\u00a0 an independent expert<\/a>, who handed down a price tag of R729-million. But the Guptas balked at this and Oakbay sued.<\/p>\n

The case is being opposed by Surv\u00e9, his company Sekunjalo Investment Holdings and Sekunjalo Independent Media. The latter is the consortium that holds Surv\u00e9\u2019s stake.<\/p>\n

The case was heard on Friday, where the judge ordered that a late supplementary affidavit by Surv\u00e9 was admissible. The court gave Oakbay time to respond.<\/p>\n

A second hurdle is that the Gupta stake is subject to the approval of the competition authorities and the PIC, according to contracts between Oakbay, Sekunjalo and the PIC.<\/p>\n

In February, Surv\u00e9 wrote to PIC\u2019s Matjila to ask whether the corporation would approve of the Gupta stake. Matjila responded in a March 23 letter in which he raised the possibility of \u201canticompetitive behaviour\u201d, presumably because the Guptas already have extensive media holdings in The New Age<\/em> and their TV station ANN7.<\/p>\n

He also said PIC had to consider \u201cthe best interest of our investment both as a funder and equity holder\u201d and \u201cthe need to safeguard our expected returns as well as the association we have taken in co-investing with yourselves [Sekunjalo] and Interacom Holdings Limited [the Chinese consortium]\u201d.<\/p>\n

He concluded: \u201cHaving regard to the above circumstances and the discretion we are required to exercise herein, we do not believe that it would be in the best interest of our investment, the borrower company [Sekunjalo Independent Media] as well as the ultimate asset holding company [Independent] to consider your request favourably.\u201d<\/p>\n

In other words, a resounding no to the Guptas.<\/p>\n

“…\u00a0<\/em><\/strong>actually biased, ill-advised and not authorised\u00a0…”<\/em><\/strong><\/p>\n

Surv\u00e9\u2019s legal team sent this to Oakbay\u2019s lawyer Gert van der Merwe, asking Oakbay to drop their court dispute over the price tag. Van der Merwe wrote back, accusing Surv\u00e9 of trying to \u201cderail\u201d the agreement.<\/p>\n