The war for The Market Herald is not over
The war for The Market Herald is not over
Welcome to a midweek edition of Unmade.
Today we focus on yesterday’s twist in the battle for control of The Market Herald, the parent company of ASX gossip forum Hot Copper, and more recently Gumtree, Carsguide and Autotrader.
If you haven’t checked out the website for out first conference RE:Made - Retail Media Unmade recently, it’s worth doing so. We’ve now published most of the program. The half-day conference is in just three weeks’ time. If you need to understand why everyone is talking about retail media, then take a look.
The Takeovers Panel gets involved
You don’t see many announcement from The Takeovers Panel involving media companies. I don’t remember seeing any over the last decade.
The issue looks highly technical at first glance - a complaint that the company’s biggest shareholders - the Argyle family - haven’t properly disclosed their associations. Given that David Brian Argyle (who goes by Brian) and Gavin Argyle are father and son, on the face of it, that looks like something of a pedantic complaint.
The reality is more complicated, and the decision of The Takeovers Panel will likely decide the fate of the company. If it goes one way, The Argyles will likely take full control, at what may be a bargain price. If it goes the other, we could even see an unlikely return for ousted managing director Jag Sanger.
Before we come to that, let’s catch up on how we got here.
Hot Copper has been around as a place for investors to chat about small ASX stocks for almost 30 years now. The design still feels like an old school bulletin board.
Over the years it cycled through owners, ending up in the hands of Report Card, aligned to Gavin Argyle, which floated the business on the ASX in 2016.
After the float, the Argyle family remained significant shareholders, with Alex Pismiris, representing the Argyle-aligned Capital Investment Partners on the board.
Later, the Perth-headquartered company changed its name to The Market Herald and, for the most part, continued to fly beneath the radar.
That all began to change after managing director Jag Sanger joined at the end of 2018. Sanger, had come up through the consultancies and done two years heading mergers and acquisitions for Fairfax Media before getting exposure to the automotive strategy space, including as a director of Carsguide and the eBay-backed Matchacar.
The wider media industry began to take notice late last year, when Sanger announced an $87m deal to buy Gumtree, Carsguide, and Autotrader from the Norwegian classified player Adevinta.
Sitting alongside Sanger’s expanded plans for The Market Herald, which was already streaming video and planning a weekly newspaper launch, The Market Herald suddenly looked like the most interesting media company nobody had heard of. The biggest question in my mind at the time was whether the sponsored content which drove some of the TMH revenues had full separation from the rest of the publication’s output. That turned lout to be something of a side issue.
Back in September I recorded a podcast with Sanger in which he set out his - big - ambitions, including addressing that point. It would become a much broader company, including pushing into the premium lifestyle space. Or that was the plan, anyway. You can see the transcript of that interview via this link.
Later I toured the TMH headquarters in Perth, in a prestigious office tower overlooking Elizabeth Quay. By that point the company had 110 staff across Australia and Canada, a number that would grow when the acquisition of Gumtree, Carsguide and Autotrader was completed.
Behind the scenes though, the Argyles had decided Sanger had to go. They filed a Section 249D notice to the ASX, which triggers a shareholder vote on whether to remove a director.
Sanger was placed on leave and, just before Christmas, resigned before a formal vote could be called.
That leaves a lot in the air. The company has until May 31 to pay Adevinta the outstanding $61m it owes on the purchase of Gumtree, Carsguide and Autotrader.
One of the mechanisms being used is to issue new shares in the company, and to use those proceeds to fund the purchase.
Which brings us to yesterday’s development.
One of the likely outcomes of the process is that the Argyles, via their various ownership vehicles, would emerge with majority ownership of the company’s shares. The ASX has strict rules about this, designed to ensure that when somebody takes control of the company they pay a fair premium to the other shareholders to do so.
Although the company is currently trading on a market capitalisation of $112m, there’s an argument that it’s on course to be worth two or three times that amount, if it can continue to be well managed.
There have been a number of occasions over the past two decades where Argyle’s CIP has successfully taken control of companies in a profitable manner. There’s nothing illegal about that, when the rules are followed.
This explains yesterday’s intervention from Bermuda-based United Investment Ltd. UIL, headed by Duncan Savile, owns a sizeable minority stake of around 24%.
UIL has complained to the Takeovers Panel that the rights issue is being run improperly.
The Takeovers Panel is effectively the government-backed arbitrator of company takeovers.
UIL wants the Takeovers Panel to order that the Argyles should be forced to make full disclosures of their interests in the company, and restrained from voting them.
At this stage, the Takeovers Panel has not said whether it will look into the affair.
If it does back UIL’s side of the argument, it’s entirely possible UIL would then issue its own Section 249D notice to remove Gavin Argyle as director. Savile was a supporter of Sanger’s strategy for the company. It’s not impossible that if - and it’s worth stressing the if - that happens, it could open the door for Sanger’s return.
Sanger, meanwhile, is currently on a skiing holiday in France with his partner Sarah Lenard, who was also ousted from the company over the Christmas break.
If it decides to act, the Takeovers Panel will need to move fast. Trading on the new shares issued under the fund raising round is due to begin at the end of this month.
There will likely be more developments in the next few days.
Nike pushes The Unmade Index upwards
The Unmade Index rose slightly yesterday, bucking the wider trend of the ASX which dropped on news of another 0.25% interest rate hike.
Nine saw the most growth, up by 1.38%, while Ooh Media dropped back by 3.18%.
Earnings season kicks off in earnest next week, with Seven West Media starting the ball rolling on Monday.
Time to let you go about your Wednesday.
I’ll be back tomorrow with a conversation with Dentsu’s new chief investment officer Ben Shepherd. It’s an excellent chat.
Have a great day.
Toodlepip
Tim Burrowes
Publisher - Unmade
Tim, I know that you are perspicacious and can see things that others can't. But I think that "Later I toured the TMH headquarters in Perth, in a prestigious office tower overlooking Elizabeth Bay." is a bit of a stretch given that Elizabeth Quay and Elizabeth Bay are near on 4,000km apart. Chuckle, chuckle.
Hi Tim, love these articles and am loving Substack and Unmade. Just a quick note to avoid more notes from WA folk, it's 'Elizabeth Quay' in Perth (or EQ if we're being lazy), not 'Elizabeth Bay'. Regards, Natasha