Acquisition by Ringier hits a dead end after discovering Ghafla manipulated figures
After three months of a shaky marriage, news site Ghafla and Swiss media firm, Ringier, are divorcing. Ringier management announced the fallout this morning, sparking confusion among Ghafla employees who have been left without an office as they had been absorbed by Ringier.
“After a 3 months’ partnership between Ghafla & Ringier Kenya this collaboration will now end with the start of December,” Tim Kollmann, the Managing Director of Ringier Africa Digital Publishing said in a memo. “This partnership saw the great broadening of the vision of Ghafla, as well as training & connection with our pan-African Pulse brand. While further integration together was always an option, both sides have decided that this is not the best way forward for now.”
This weekend is the last partnership period and will be used for transition, with Ghafla reverting to its old website and operational structure. Ghafla will now have to look for a new home. “…with good joint planning, (Samuel) Majani and myself have decided that this first week-end of December is ideal to transition back again – including tech transition back to the old platform as well as team transition to another office space,” said Mr Kollmann.
According to people familiar with the matter, Ringier management fell out with Ghafla founder and co-CEO Samwel Majani over a number isssues, including revenues and website content. Majani, who founded the website a decade ago while in college, had been retained for a year to allow for transition. Another source, however, said the divorce was amicable, but pointed that the Ghafla CEO opted out. “He was frustrated,” said the source. “He just asked these guys to give him back his website.”
Since Ringier moved in, it has been combing Ghafla’s books and its business stratefy to ascertain its true value.
Just before the relaunch, they discovered somethings were not adding up. So the buyout was put on hold and the mining of information continued. Ringier also withheld funds and forced Majani to continue paying Ghafla staff salaries.
But to save face and keep the planned relaunch on course, they opted to work as partners as they sort out the issues. Ringier also changed the terms and introduced a revenue sharing model instead of a financial acquisition to protect their investment, something that could have thrown the spanner in the works.
The acquisition had been in the works for some time and was solemnized in October when Ringier management took over operations of Kenya’s leading entertainment news portal. Cracks in the deal, estimated at about Ksh60 million, began to emerge just before the relaunch when Ringier sent out a press release announcing the acquisition only to recall and reward it to a partnership.
This is a major blow to Ghafla, which was repositioning itself into a mainstream news portal with hopes of attracting a bigger audience and a large advertising pie. It had begun developing a more credible mien in digital publishing.
How it all started
A notice put in a section of the press few months before the launch indicated Ghafla was to transfer its business and assets, including intellectual property rights, contracts and office equipment to Ringier Kenya Ltd. The deal was seen as a milestone for digital publishing in Kenya, with more investors joining the market such as Genesis of Russia through its TUKO portal.
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Ghafla rejected offers from Radio Africa Group, which reportedly gave a bid of Ksh5 million. After that, Radio Africa started Mpasho. On entry, Ringier poached high-profile journalists led by former Nation Media Group education reporter Benjamin Muindi as head of content. Muindi, who worked as a consultant left after the rebrand to focus on his PhD studies at Daystar University. Efforts to get a replacement have not attracted a credible candidate, with Alphonce Shiundu, formerly Standard Parliament editor, declining to join the team.
So what next?
The matter is likely to end up in court or arbitration in case either party seeks recourse. Now Ringier is back to its initial plan of starting off a new website, but that is more tedious. It may shop around for a less popular website but stable and grow it.
FULL MEMO BELOW
Dear Ghafla Team,
After a 3 months partnership between Ghafla & Ringier Kenya this collaboration will now end with the start of December. This partnership saw the great broadening of the vision of Ghafla, as well as training & connection with our pan-African Pulse brand. While further integration together was always an option, both sides have decided that this is not the best way forward for now.
Therefore with good joint planning, Majani and myself have decided that this first week-end of December is ideal to transition back again – including tech transition back to the old platform as well as team transition to another office space. Majani will accordingly further coordinate.
The whole Ringier team as well as myself want to thank you for your cooperation and motivation and wish you all the best for the future!