I want to buy CNN. There is a rhyme and
reason to it, so before you guffaw to death, hear me out.
Rupert Murdoch, the Australian/ American
media mogul, finally made the move that had been anticipated for years, in making
a bid to purchase Time Warner, the storied American media behemoth. He made an
initial bid of $85 per share, and the machinations around that bid are what put
CNN up for sale. First, 21st Century Fox, Murdoch’s vehicle of
choice, already owns Fox News, the cable news channel that is the philosophical
opposite of Time Warner’s CNN. Regulators will not allow the two to sit in the
same stable, which has led Murdoch’s team to already indicate that CNN would be
up for sale were their bid to be successful.
The Murdoch bid has already foundered. It
was rejected – that was the announcement last Wednesday – based on price (too
low) and concern about the voting power of shares. Both of these are
surmountable problems. Everyone, including the most casual of observers,
expects that the $80 billion offer is simply the opening shot of what will be a
long drawn out war that may last all (American) summer. The pricing may go
north of $100 billion, keeping us all entertained and serving as Barbarians at
the Gate, Part II.
In terms of voting shares, Murdoch has
structured his companies such that he and his family retain control with
minimal shareholding. This has been through the issuance of dual classes of
shares. Many complain that this is barely acceptable from a corporate
governance point of view, and would certainly be unacceptable to Time Warner
shareholders. The counterpoint to this is that there is already significant
overlap between the two sets of shareholders, meaning that they have already
priced in and accepted the Murdoch discount, and this wouldn’t particularly be
a sticking point. Also, Murdoch has the option of simply increasing the cash
portion of his offer, lessening these objections.
So now that we have the background and
preliminaries out of the way, why would a Kenyan purchase CNN? It is a mix of
vanity, ambition and eminent logic, wrapped up in a ready opportunity.
First the vanity and ambition bits. For
some reason, Kenyans – even the most financially muscular among us – have been
reticent in wanting to go beyond the shores of Kenya and East Africa in search
of their fortunes. They have behaved exactly how we behave as a country:
competing furiously to be the leader in the region and continent, yet strangely
shy when it comes to global conquest. We (and they) seem to think that we’re
not ready yet to join the global club. Except for our athletes and rugby sevens
players (and Mukhisa Kituyi), we seem to feel that the world is not yet our
oyster, that we must wait a few more decades before this is the case.
This is unlike the case in Angola, Egypt
and South Africa. Egyptians such as Mohamed Al-Fayed and the Sawiris family
long left the stifling confines of Cairo, and went on a tear through Europe and
the rest of the Middle East. The Oppenheimers and Ruperts own (or have owned)
some of the most iconic brands in the world. The most interesting case is that
of Angola, which has, in effect, engaged in a reverse colonial takeover of
Portugal. Many of Portugal’s flagship corporate entities are in Angolan hands,
and the brain drain between the two countries is now southern-bound. Further
afield, the most iconic of British brands, Jaguar and Land Rover, are now in
Indian hands. The company that now owns them, the Tata Group, also owns other
icons such as Tetley tea and Corus steel. There is absolutely no reason for
Kenyans to not join that list.
On to the logic. CNN has perhaps the
world’s strongest brand in news, outside of the BBC. Despite the fact that it
is an also-ran in its home market in the United States, it still has enormous
upside potential in a world that is ravenous for quality news. CNN-branded
channels, websites and conferences would be quite lucrative, and revenues would
easily justify the purchase price.
What about competitors, you ask. CNN has an
enterprise value of between $6 billion and $8 billion, and a bidding war would
drive the price quickly beyond $10 billion. CBS’s Les Moonves and Sumner
Redstone are said to be keenly interested, as is Michael Bloomberg of the
eponymous company. Simple: split CNN into its constituent units – domestic and
international. Let the American moguls fight over the US assets, which
complement their own companies. My bid would be purely for the international
unit, which is of little interest to them.
Now, obviously, my bank account is a puny
one. How do I pay for it? Well, dealmakers such as David Owino of Ascent
Capital (who, full disclosure, was my classmate at Lenana) and Centum’s James
Mworia have proven that young, ambitious fund managers can raise funds in the
hundreds of millions of dollars, and they are consistently proving that their
ambitions are higher than those of older generations.
So, James and Owish can expect a phone call
from me in the next few days, and the Americans had better be prepared for the
invasion of the African armada.
Also published in the Business Daily on July 22 2014, at http://www.businessdailyafrica.com/Opinion-and-Analysis/Why-Kenyans-should-not-fear-going-abroad-in-fortune-hunt/-/539548/2392820/-/item/0/-/12qn6d4/-/index.html
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