THE Public Investment Corporation (PIC), a 17% shareholder in Avusa, has decided not to support the buyout of the company - which owns the Sunday Times and is part-owner of Business Day - by Times Media Group.
The new Companies Act allows shareholders with more than 15% of voting rights to vote against a deal, and to approach a court to set aside resolutions approving it.
Times Media Group, formerly known as Richtrau, is an Mvelaphanda unit with shares in Avusa. It has already won 65% of shareholder backing for its R24 per share offer for Avusa stock.
The PIC said yesterday that as a "concerned shareholder" it was worried about Avusa's underperformance.
Daniel Matjila, the PIC's chief investment officer, said at a July 19 meeting that the state pension fund manager's investment committee had resolved not to support the buyout.
Mr Matjila said if turnaround resources were already available to Avusa, the deal was not needed.
He pointed out that Times Media director Andrew Bonamour was already a member of the Avusa board and, with CEO Colin Cary, a facilitator of its turnaround plan.
"Whilst the structure, post the deal, results in a significant reduction of Mvelaphanda's shareholding, the perceived collaboration between Blackstar, Mvelaphanda and Universal Hirt & Carter results in this bloc of shareholders owning more than 33% of the business and thereby rendering them the controlling shareholders.
"This business underperformed with Mvelaphanda being one of the significant shareholders, and therefore their continued influence via this controlling bloc is of concern to the PIC," Mr Matjila said.
Mr Bonamour said he did not want to comment on speculation and Times Media was continuing discussions with the PIC.
The PIC was also concerned that Avusa had accumulated debt of about R650m after the deal on the turnaround strategy.
Mr Matjila said the debt would put pressure on the company's performance as the six-year debt facility would have to be paid back using resources that could be used to grow the company.
Avusa has a net debt of close to R200m, but it has net cash of close to R500m.