Mpact refutes Caxton allegations

One would think that any company exposed to consumer spending would appreciate a large shareholder when consumers are being battered by rising interest rates and high food and fuel prices – especially a shareholder that is willing to invest another few R100 million in the business.

Then again, it also seems reasonable to expect that the large shareholder will appreciate it when the company produces good results. Shouldn’t shareholders and directors/management sit on the same side of the table to create wealth?

This makes the spat between Mpact and Caxton* interesting.

Read/listen:
Tensions between Caxton and Mpact boil over
[TOP STORY] Caxton vs Mpact: The wheels grind slowly 

In a Sens announcement on Wednesday, Mpact hit back at allegations voiced by Caxton in its Sens announcement last Friday.

Caxton had accused Mpact’s board of directors of not doing their jobs properly. One allegation was that the Mpact board is keeping price-sensitive information from shareholders and the general investing public. This is a very serious allegation, and one of the things the JSE is really strict about.

Background

The background to the differences between the boards of Caxton and Mpact revolves around Caxton’s stated objective that the company wants to gain control of Mpact. Currently, Caxton owns around 34% of Mpact, but cannot increase its shareholding further as the 35% level would trigger a compulsory offer to all shareholders.

However, a general offer to shareholders is unlikely before allegations of collusion between Mpact and competitors are finalised by the competition authorities. The possibility of a fine of millions of rands can make a big difference to Mpact’s share price and a potential offer.

Meanwhile Caxton did some footwork on the side – filing a merger notification to the Competition Commission about a possible merger between Caxton and Mpact. The Mpact board objected, saying that it hasn’t received an offer and there is no merger in the offing.

The disagreement flared up after Mpact CEO Bruce Strong responded to questions posed during the presentation of Mpact’s interim results a week or so ago, which prompted Caxton to retaliate with its statement on Friday.

Response

On Wednesday Mpact responded.

“Mpact strongly refutes the allegations and insinuations contained in the Sens announcement released by Caxton And CTP Publishers And Printers Limited (Caxton) on Friday, 12 August 2022 and repeated in subsequent media interviews.

“There is no basis for Caxton’s concerns. It has long been a matter of public record and reported in the company’s annual financial statements that Mpact is cooperating transparently and in good faith with the Competition Commission regarding the investigation initiated in May 2016, and that the commission is not seeking to impose a penalty against Mpact,” reads the announcement.

Regarding the dispute about Caxton filing a merger application, Mpact says that it declined to support it, as no offer was received.

“As per Mpact’s Sens announcement of 30 June 2021, Caxton applied to the Competition Commission to file a separate merger notification for approval to acquire control of Mpact before making any offer to the Mpact Board or shareholders.

“The Mpact Board declined to support a joint or separate merger filing because Caxton had, amongst other things, not disclosed a proposed offer price or terms, rendering the Mpact board unable to determine whether any such offer would be in the best interests of its shareholders and the company.

“The Competition Commission agreed with Mpact’s position. Caxton took this decision of the Commission on review before the Competition Tribunal – whose decision is pending. In the course of the review proceedings, the Competition Authorities received confidential representations, including from a third party. Caxton then brought an interlocutory application to gain access to the confidential submission,” says Mpact.

The Competition Tribunal granted limited access, only to Caxton chairman Paul Jenkins, and under the condition that it is for purposes of the review proceedings only.

Strong objected in a earlier interview with Moneyweb to this being labelled “secret” information, saying that it is for parties to respect the confidentiality of this third-party information.

“Mpact is engaging the relevant regulators regarding Caxton’s conduct. Caxton’s allegations regarding the non-disclosure of price sensitive information are strongly denied. The Mpact Board diligently reviews and assesses, on an ongoing basis, the risks and opportunities facing the business.

“We take advice from our sponsors and legal advisors on matters relating to our reporting obligations, and we are confident that Mpact’s disclosures to its shareholders have been and remain appropriate and up to date,” says Mpact in its announcement.

It added that Mpact has not received any form of offer from Caxton to date, and will appoint an independent board to diligently assess the merits of such an offer and to make the requisite recommendations to shareholders, in accordance with its statutory duties.

Meeting request

Mpact also reacted to a move by Caxton to call a shareholder’s meeting. “The company has rejected, as unlawful, a demand received from Caxton on 15 August 2022 to convene a shareholders’ meeting.

“The company will consider all lawful demands to convene shareholders’ meetings and comply fully with its obligations towards its shareholders. Mpact will continue to engage with all shareholders and the relevant authorities on matters affecting the company and will provide all appropriate and lawful disclosures,” it says.

Looking in from the outside, a meeting between the parties to resolve their differences seems like a good idea. A shareholders meeting would be necessary too, to pass the resolutions that were not authorised at the annual general meeting in June.

*Caxton’s majority shareholders are also majority shareholders in African Media Entertainment (AME), the owner of Moneyweb