They have been offered a substantial premium to sanction the deal Naspers shares worth almost twice their MIHL holdings but part of the reason for the unusual generosity is that the MIHL share price has been considerably higher in the past 12 months than it was just before the offer was announced.

In November last year, MIHL peaked at $9,53 on the Nasdaq, but the share has since slumped, in line with media and technology counters worldwide, to a low of $2, 51 in August. Still, the outlook for MIHL is encouraging.

After cost cutting, it lifted earnings before interest, taxation, depreciation and amortisation for the six months to March 188%, and its businesses in Africa, the Mediterranean and Asia are surely have greater potential for growth than the more mature SA pay-TV operations.

This growth might be diluted by the other Naspers operations when shareholders hold stakes in a more diverse entity under the simplified structure.

The argument for accepting the Naspers shares is that with the new structure the group will have access to substantial cash to fund expansion, its shares will be more tradable than MIHL shares, and management interests are clearly aligned with share-price growth, as the latest annual report shows.

Much depends on whether you believe the world economy is on the path to recovery or the slippery slope to recession. Optimists might be tempted to hang onto their shares in the hope that the Nasdaq has hit the bottom and is poised for a rebound.

However, with both the US Federal Reserve and the International Monetary Fund making cautious noises recently, it might be wiser to take any premium to the market price with both hands while it is on offer.

Last resort for state

AFTER years of trying to restore Aventura to profitability and failing dismally, government was faced with only two options either sell the state-owned resorts as swiftly as possible, or accept the sad fact that they would never be commercially viable and close them down.

The latter is politically unpalatable, given that most of Aventura's resorts are in outlying areas and are the only form of employment for hundreds of families who would otherwise have no income. Anyway, not all of the assets are dogs; some are on prime properties and have every prospect of making money once freed of the rest of the group's problems.

So, the wholesale privatisation that is now under way was the right move, with an initial four resorts up for sale and a further eight due to go on to the market in the coming months.

Unfortunately for government, news of the extent of Aventura's financial woes broke just as it was attempting to fast-track the sale of the four resorts. Potential buyers are, no doubt, now seeking price concessions, fully aware that Aventura needs funds within three weeks if it is to make a dent in its overdraft with Absa.

In addition, creditors are watching government's actions closely after the national treasury refused to provide another guarantee to keep Aventura going. The last thing government needs now is a creditor-triggered liquidation application. The full privatisation process is sure to go ahead as government cannot afford a fall-out from a decision to liquidate. The trade-off is that the financial year is unlikely to see much income from the sale, with most of the proceeds needed to repay debt.

Spotlight on banks

NUMEROUS codes have been proposed to help investment banks clean up their research acts to avoid the conflicts of interest that emerged after the collapse of the dotcom bubble.

The latest, coming from the New York Stock Exchange, advocates improved transparency and severing direct links between analyst compensation and investment banking fees, among other proposals. All make sense and are better than the alternative heavy-handed regulation.

Demanding a formal separation of research from investment banking would be a disproportionate response.

The Financial Times' Lex points out that banks' reputations, and those of the analysts, do matter to them, and providing credible research could prove an excellent marketing strategy in a bear market.

It is true that the US regulatory authorities were asleep when it mattered, but bad regulation during the bear market is a poor response to bogus research during the bubble.

If investors are not prepared to pay for research, mandating that research operations be independent would be impractical.

For investors prepared to pay for independent research, it is available. Sacrificing a scapegoat would help no one.

Cape Editor Dave Marrs edits The Bottom Line. E-mail to This email address is being protected from spambots. You need JavaScript enabled to view it.

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