The circular Avusa sent out to shareholders on Monday highlights what a
good deal Allan Gray did when it sold 30 percent of the media and
entertainment assets of the group formerly known as Johnnic
Communications to Mvelaphanda Group for R1.4 billion, writes Ann Crotty in Business Report.

The Mvela purchase attributes a total value of R4.6 billion to the group, compared with a net book value of about R1 billion, according to the circular.

The circular details the impact of the unbundling of the M-Net /SuperSport stake and the proposed splitting off of Avusa's effective 33 percent holding in printing and publishing group Caxton.

From March 31 Avusa will hold only those media and entertainment assets over which its management has control. These assets include the Sunday Times , the Sowetan , Nu Metro , Exclusive Books , Gallo Music and 50 percent of BDFM .

The pro forma income statements contained in the circular indicate that the Mvela purchase price is equivalent to a price:earnings ratio of between 18 and 20. This is a considerably more demanding rating than any other share in the JSE's media and publishing sector and reflects the stronger market sentiment that prevailed when the deal was struck in October.

The latest indications from Mvela are that it appears to be happy to proceed with the deal. Industry sources said the price could only be justified if there was a battle for control of Avusa and the contenders were prepared to value the assets at well above the market rating.

Click here to read the full report, posted on Business Report's website.