Business

Monday October 19, 2009

NSTP’s privatisation remains questionable

Comment By Risen Jayaseelan


BY many counts, the planned privatisation of The New Straits Times Press (M) Bhd (NSTP) has fallen short of expectations, at least from the standpoint of its shareholders.

The general offer by parent Media Prima Bhd is priced at 17% below NSTP’s last traded share price and is less than half the newspaper company’s net tangible assets (NTA) per share.

Furthermore, NSTP has valuable property assets that thoeratically, could be unlocked.

Detractors of the proposal also highlight the fact that NSTP has a much cleaner balance sheet, with a net debt of RM23 mil compared to Media Prima’s RM331 mil.

But the biggest question is this: Is the privatisation really necessary? Why can’t Media Prima, which already owns 43.3% of NSTP, bring about efficiencies and synergies under the current shareholding structure?

To recap, Media Prima, which already owns 43.3% of NSTP, wants to make the latter a wholly-owned subsidiary to create “the country’s truly integrated media group.” Media Prima, that has TV, radio, outdoor and internet media platforms, is offering to buy the shares in NSTP which it does not own, via a one-for-one share swap together with one free Media Prima warrant for every five shares of NSTP.

The offer values Media Prima shares at RM2 a piece, thereby attaching a value of RM2.10 per share for NSTP shares (considering the one-for-one ratio and the free warrants).

Media Prima officials justify their below-the-market offer for NSTP shares on the belief that the latter’s share price has risen in recent months mainly because of speculation of the privatisation and less to do with fundamentals.

That may well be the case and to be sure, a higher value for NSTP or a lower one for Media Prima, would irk Media Prima’s shareholders, considering that this is a share swap exercise.

As for concerns about the undervalued real estate of NSTP and the higher NTA per share (of RM4.50 per share), the counter argument is that a media company needs its office space and printing equipment to function and therefore such assets should feature less in its valuation. Ad revenues and subscription fees should be bigger factors. And on these counts, NSTP isn’t doing that great on its own and could do better when wholly integrated into a group that has multiple platforms. Furthermore, Media Prima officials also say there are no plans to sell any of the property assets of NSTP.

But this still does not address one basic argument: Why can’t Media Prima bring about these positive changes to NSTP under the current shareholding structure? With 43.3% of NSTP, Media Prima is entitled to have significant board representation and a say in the direction of management of the newspaper group. True, the changes it proposes will have to be examined and okayed by independent directors of NSTP. But what’s wrong with that? For example, one of the plans is to have a “closer working relationship between the marketing and sales teams of both Media Prima and NSTP, ensuring a united front in pursuing sales initiative.”

If I was an independent director of NSTP, I would have little problems with that suggestion, provided it can be shown that this would benefit NSTP’s bottomline too. And if I were an independent director of Media Prima, I would also question if this costly exercise of privatising NSTP is really worth it.

·Deputy news editor Risen Jayaseelan feels that there are insufficient reasons for NSTP to be taken private.

 
NSTP :  [Stock Watch]  [News] 
MEDIA :  [Stock Watch]  [News]


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