Kigoda Consulting

Naspers’ convoluted control structure

9 June 2017

Naspers’ control structure is once again in the news. This Moneyweb piece suggests that the voting that currently controls the group could be under threat. Kigoda Consulting raised similar questions in a 2016 report on Corporate Governance in South Africa.

Although Naspers’ surging share price since 2012 has secured the company many supporters, its control structure presents a potential corporate governance issue. This control structure might be deemed necessary for Naspers to operate in certain jurisdictions, such as China where the government has concerns over media ownership. However, the control structure is designed to prevent a hostile takeover and will limit protection for minority shareholders and their ability to influence matters. In 2014, a proposed merger between Naspers’ Media24 and Paarl Media (now listed as Novus Holdings Limited) collapsed, in part to Naspers’ reluctance to open the control structure to scrutiny.[1]

Who are the ultimate beneficiaries?

Naspers has two classes of shares. The N-shares, which are those listed on the JSE, account for 35.8% of the votes. Various companies hold the A-shares, which have 1000 votes for every one N-share vote. The A-shares are owned by three opaque companies. Keeromstraat 30 owns 30.8%, Naspers Beleggings owns 49.1% and Wheatfields 221 owns almost 19%. It is unclear who the ultimate beneficiaries of these companies are, although a 2004 filing with the US-Securities and Exchange Commission says that the shares held by Keeromstraat and Naspers Beleggings “may be considered to be beneficially owned by certain directors of Naspers”.[2] Naspers CEO Koos Bekker reportedly owns 25% of Wheatfields 221.[3] Some reports speculate that the other owners include Naspers’ former chairman Ton Vosloo and other former executives such as Naspers’ former chairman of the audit and risk committee Boetie van Zyl and non-executive director Cobus Stofberg, who also owns 25% of Wheatfields 221.[4] In 2005/06, Jannie Mouton’s PSG Group mounted a bid for control of Keeromstraat, but unsurprisingly failed given that the directors of Keeromstraat overlapped with those of Naspers.

​Board independence lags

This problematic control structure is compounded by the lack of board independence. After a year’s sabbatical, Koos Bekker has returned as executive chairman. Although Naspers considers eight of 11 non-executive directors to be independent, the lengthy periods served by a number of directors raise questions over their independence. This includes lead director Fred Phaswana and Rachel Jafta, who were appointed to the board in 2003, and Ben van der Ross, who was appointed in 1999. If these directors are excluded, there is no longer a majority of independent non-executive directors on the board.

[1] Harber, A. ‘Fair use or foul’, Financial Mail. 26 September 2014. Available at: http://www.financialmail.co.za/features/2014/09/25/naspers-vs-caxton-fair-use-or-foul
[2] SEC. ‘Napsers 20-F’. 2004. Available at: https://www.sec.gov/Archives/edgar/data/1106051/000095015704000684/naspers20f.htm
[3] Rose, R. ‘Why Koos Bekker had to sell his Naspers shares’. Financial Mail. 24 September 2014. Available at: http://www.financialmail.co.za/opinion/fineprint/2015/09/24/fine-print-why-koos-bekker-had-to-sell-his-naspers-shares
[4] Mittner, M. ‘Why Naspers is still a buy’, Financial Mail – Investors Monthly. 29 October 2015. Available at: http://www.pressreader.com/south-africa/financial-mail-investors-monthly/20151029/textvie

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