Chapter One – From strength to vulnerability

Chapter Eight: Robinson restructures

With the merger of the Mercury into Natal Newspapers, it became necessary also for Robinson and Company to re-examine its own structures and reassess its best interests.

The 30% interest in Natal Newspapers was secured by the merger deal, and promised a lucrative income stream, but control of the whole Robinson and Company operation was balanced on too fine an edge, because of Saan’s (later TML) holding a 49% share of the company, and because some of the family shareholders were dissatisfied with the performance of the company and were openly talking of selling their shares.
Athol Campbell, newly arrived as a player on the board of Robinson and Company, was the moving force behind the restructuring. Campbell recounted what happened: “I said to David (Robinson): ‘Come on, let’s put a bid together and buy out the family members. They want to go, so let’s get rid of them. There’s no point in keeping shareholders in who want to go. Let’s buy them out and buy Saan out of the non-newspaper interests’ – Robprint, the Robprint building, the Mercury building.
“David and I went to see a chap called Guy Krige at Standard Merchant Bank, and we put together a complicated scheme of arrangement.”
Campbell wanted the restructuring done as soon as possible, because he said “if any family member sold, Saan (already holding 49% of the company) would have taken up a portion of the shares. Control would have changed. It was a knife-edge thing. It took only one family member to sell and Saan would have had control. And Saan was losing R30-million a year.”
He said he and David went to Gordon Waddell of JCI, the largest stakeholder in Saan and said: “We cannot allow it (a Saan take-over) to happen. We want to form a holding company and we want agreement from you that Saan will not try to gain control by stealth. He said Saan wanted the cash. Saan’s interest was only in the Natal Mercury and in Robinson and Company’s 5% shareholding in Saan, not in the property and Robprint. David and I said the family wanted to get out.
“We made an offer for the family’s shares. We said the family could take cash or new shares in Robinson Group Holdings. A lot of them took cash. There must have been 120 family shareholders, Robinsons and Collinses, at that time. Some even lived outside the country as far away as the Middle East, the shares had got spread so widely over the generations. We said we would underpin in cash any shareholders who wanted to get out.”
The deal worked out with Standard Merchant Bank provided for the formation of two companies. One was called Robinson Group Holdings, and would take control of Robinson and Company through holding 51% of the shares. This secured control for the family. The second company was a pyramid formed to control Robinson Group Holdings itself by holding 100% of the shares in Robinson Group Holdings, and was called Robinson Group Investments. Athol held 75% of Robinson Group Investments, and David Robinson the remaining 25%.
They succeeded in buying out most of the family from their entitlement in Robinson Group Holdings, securing actual control for David Robinson and Athol Campbell. Robinson Group Holdings then bid for the assets of Robinson and Company other than the shares in Natal Newspapers. Robinson and Company was thus left holding only its 30% share in Natal Newspapers. The Mercury building was sold and the cash proceeds from the sale were distributed upwards. The 5% shareholding in Saan was sold to Robinson Group Holdings.
While this was going on, Saan was itself being shaken up, because of the collapse of the Rand Daily Mail. Gordon Waddell, then boss at JCI, was controlling the changes being made, which saw Clive Kinsley ousted and David Kovarsky and Stephen Mulholland brought in to run the company. On the board of Robinson and Company were Stephen Mulholland, Lawrence Clark and Michael Noyce.
While Campbell stressed the importance of the restructuring for the sake of gaining secure control, Argus executives felt the real motive was personal profit for Campbell and David Robinson. They claimed Campbell and David Robinson bought out the other family members on a very low rating of their shares’ worth and benefited from a rapid re-rating of the share value, because very shortly after acquiring the shares from the rest of the family, an Argus source said, a windfall in tax benefits from the valuation of the Mercury title rights within Natal Newspapers came through, to be shared only by Campbell and David Robinson, but not by the family members who had just sold their shares.
The Argus source said: “What they did was they valued the title rights in their accounts, I emphasise their accounts. They had the value of their 30% of Natal Newspapers, but they wrote to zero the title rights, which in the case of the Mercury was R8-million, claiming it was not certain they would ever get payment for them. They got the auditors to agree to that. They then bought out the minority shareholders, the Robinson family, valuing their share of that zero at zero. So they got it for a song. Then, immediately after that, Argus started paying out that money to them. We paid it in very rapid time, so they got R8-million, or their share of the R8-million that would otherwise have gone to the family.”
While not an illegal way of doing things, and other accountants have agreed it would not have been illegal to have done a deal that way with the family’s shareholders, there would be something very brutal about organising to buy your own family out that way. Athol Campbell has denied flatly any such practice. Being in business for profit, he made it clear he was trying to put the company back on a viable basis and to secure control from the danger of any take-over, but is adamant that he and David Robinson were not out to deprive family members of their due.
If Argus’s version is to be believed, then the mistake made by family members who wanted to sell their shares was that they accepted the low valuation of the company unchallenged, when a closer examination of what was going on would have shown there was every probability that Argus would pay over the title rights value and that it was therefore wrong to write it down to zero.
Family members have admitted they did not keep close tabs on the way the company was run, nor did they have the expertise to check things like this. John Borckenhagen, a husband of one of the family shareholders, said he had often complained, when reading the financial statements, that the company had vast amounts of cash sitting around unused in its coffers. When he had suggested to the company that it put the money out on call, the response had been: “What’s call?” So he had the feeling there was not a lot of financial expertise around in Robinson and Company.
But Borckenhagen said: “As far as I am aware, and the others all agreed, it was not an unfair price they were offered. But if unusual practices were followed, nobody in the family was there to know, because none of the family shareholders was involved in the Mercury.”
But it is important to note that the rumours of cut-throat dealing with the Robinson family shareholders come from Argus sources, and these are not substantiated by members of the family or from any source within the Mercury or Robinson and Company. All my enquiries produced a rejection of the Argus version of events at Robinson and Company. This would suggest that at the time of the merger, there was something of a disinformation campaign going on within Argus about Robinson and Company, and this type of propaganda cannot be believed without substantial proof.
Asked about this controversial valuation aspect, Athol Campbell said: “As to the value of the company, it was not as simple as all that. We owned the press, but there was a lease agreement on it. There was a value put on the press. What had happened was that Robinson did not take forward cover on the press. The reason for the R8-million title rights valuation on the Mercury was a tax deal to give Natal Newspapers a huge write-off. The other Natal Newspapers titles were valued on the same basis. It meant we got an income stream out of Natal Newspapers that was tax-free. They also got the benefit.
“The whole Robinson group was valued at about R12,5-million, and the family shareholders would have got their portion of this. Everything was valued independently. In Robinson and Company’s books, there was a loan of R8-million. It was represented as cash in Natal Newspapers’ books. But the value was there. The family members got fairly treated. The Natal Newspapers deal was complicated. It was a ‘Featherstone special’. I am sure you know what I mean. The whole thing was incredibly complex, but it worked extremely well.
“The family got full value for their interests. Robprint was valued by Standard Merchant Bank. There was no hassle.”
Another area in which Argus looked with suspicion on the way Robinson and Company arranged matters for itself and its members concerned the Robinson Pension Fund. Athol Campbell took an adamant stand that the Mercury’s pensioners must not simply be transferred into the Argus Pension Fund, which was Argus’s proposal.
Further enquiries with other Natal Newspapers executives who were to some extent involved in arrangements at the time of the merger seem to suggest they actually had considerable sympathy for the way Campbell went about deciding the pension fund issue. Both Ed Booth and Stuart Newell said they would have done exactly what Campbell did, because it was in the best interests of the Mercury’s staff members.
Mercury staff members I have spoken to have often expressed the view that Campbell was their hero for insisting on allowing them the choice to stay out of the Argus Pension Fund, so they would get the benefit. They claimed the pay-out to surviving Mercury staff had been very good indeed. Mercury editor Jimmy McMillan was one Mercury staffer who went on record in showing appreciation for what Campbell had won for him by not allowing forced transfer to the Argus Pension Fund.
“When the take-over came, it was decided they would have to wind up the Mercury pension fund. Staffers had either to go into the Argus Pension Fund or take a cash pay-out. When it came to a final decision on the wrapping up the pension fund, Athol Campbell – by then chairman of Robinson and Company – put his foot down. The first suggestion was that staffers should get paid out their contribution and whatever interest there was, and Athol Campbell said no, no, no. It should be done on a proportional basis from the entire fund, the consequence being that there were pretty big pay-outs, so much so that I actually doubled my salary when I retired.”
Some in Argus, however, still believe the staff would have gained far greater benefits by transferring to the Argus Pension Fund, which had proved itself a remarkable performer over the years.
Athol Campbell explained his stance on the pension fund issue: “What happened with the pension fund was that, when the Natal Newspapers merger took place, there was an issue of how to merge the pension fund. The Robinson Pension Fund was better than Argus’s in terms of liability and assets. It was not to the advantage of the people actively employed to move into the Argus Pension Fund. They would get only three-quarters of a year’s benefit from each year’s work.
“If the pension funds had been merged, Argus would have got the benefit. We said we were not going to merge the pension funds. Argus was angry about this. They wanted to have their hands in the cookie jar. We said any new members must join the Argus Pension Fund, but old members going across to Natal Newspapers could remain in the Robinson Pension Fund. It didn’t sit well with Argus that people were getting a better benefit than their own people. The Mercury editor was better off than an Argus editor. By getting rid of Mercury people, the Robinson Pension Fund was made wealthier. When we sold out, we said there was a problem and we could not continue to have people like Jimmy McMillan and Nils Reinersten, and others who had gone into Natal Newspapers and were working in an Argus company, on our pension fund. That didn’t make sense, but we could not advise them to go into the Argus Pension Fund.
“We got our actuaries in, and the Mercury people were given the option of staying in the fund or taking their surplus portion and assets and buying an annuity. They were advised by Liberty Life, and they did extremely well. – people like Jimmy McMillan got out of the pension fund with tremendous benefit.
“When Mercury employees left the Robinson Pension Fund, we decided to give them their share of the actuarial reserve. The assets were fairly distributed. The assets were fairly valued by our auditors and by Standard Merchant Bank.”
Campbell’s explanation seems full and intelligible, and does not suggest any deliberate attempt on his part to enrich himself and David Robinson at the expense of Mercury employees. Decisions seem to have been made in the best interests of the employees.