Corporate Fraud: How Ringier Almost Got Ghafla for FREE
One month ago, the Kenyan blogosphere went ablaze with news that the deal between Ringier and Ghafla was being cancelled. According to Business Today, Ringier discovered that Ghafla had cooked its books and manipulated the figures to prove its valuation.
The story had many loose ends for a casual and well informed reader on matters finance or even technology. It didn’t make sense that PROPER due diligence was not conducted to ascertain the true value of Ghafla. It beat logic how a multi-million dollar business empire like Ringier would be so casual in really determining the true value of Ghafla. It didn’t make sense that Ghafla also allowed themselves to be taken over by Ringier without proper fail-safe mechanism in place.
According to sources close to Ringier, it’s true that Ghafla might have sexed up its books to manipulate the buyers. Ghafla’s situation was also not helped by the fact that the founder of the blog ran into rough waters when he presented the buyout figure to it’s core investor, 88mph.
This is how the whole deal unfolded.
Sometime in early 2016, Ghafla founder, Samuel Majani, who had shopped for a buyer to recover his investment and/or sell the 88mph stake, got an offer from Genesis Group of companies (owners of Tuko). They offered Ghafla a measly Ksh 7million for 100% stake in the media. That wasn’t an offer Majani was expecting but it was an improvement from the Ksh 5million offer from Radio Africa Group sometime.
Majani rejected the Genesis offer just like he did with the Radio Africa offer. Majani also was aware that some buyers are never interested in a real deal but on scrutinising the books and site analytics before using the figures against the seller. That’s how Radio Africa combed the Ghafla figures then used the same to poach all its core staff and launch Mpasho.
A few months after failing to convince Genesis Group to pay a better fee, Majani continued shopping around for a potential buyer of the socialite-churning blog. Majani landed on the doors of Ringier, a Swiss technology company which is known in Kenya for more failures than successes. Ringier offered a surprising Ksh 60million for Ghafla. The offer not only surprised Kenyan tech community, but key local bloggers and tech pundits questioned the valuation. Some of us saw it as a blessing to Ghafla but there wasn’t anything unique to make anyone value Ghafla at almost one million dollars.
The back and forth between Ringier and Ghafla set in with a clear rush to take up the offer. Ringier smartly introduced an exclusivity clause which made it impossible for Ghafla to speak to other suitors when the two were seriously looking at at deal. Majani reportedly demanded a small amount to enable him give Ringier an exclusive period to enable the Swiss company focus on the deal, locking out any other suitor.
Before Ringier and Ghafla could ink the Ksh 60million deal, a clause was introduced by Ringier in the contract which gave 88mph a stronger voice. 88mph owns 25% of Ghafla after investing Ksh 2.5million or $25,000 then. When Majani sought the view of 88mph on the deal, the investors demanded a down figure while clearly indicating that they were not going to take any figure lower than Ksh 28million as their share of the pie. Majani went back to Ringier and informed them that they needed to put down a figure to which they agreed that they were willing to make a deposit but only after take a sweet month to go through the books and site data. The Ghafla investors were opposed to Ringier being given undue access to the properties without any cash changing hands. Majani owns 75% of Ghafla so he had a stronger voice and bulldozed his way.
Ghafla immediately migrated their town office into the Ringier offices along Kindaruma Road. The new “owners” advertised for a new CEO and demanded that the site be migrated from Joomla to premium Escenic CMS. Major changes were made in record time like anything else didn’t matter. Tim Kollman was the man handling the transition and the whole Ghafla operation. Nation Media’s Benjamin Muindi was immediately hired at a salary of Ksh 400,000. Majani was made the head of sales, replacing an employee at Ringier who was demoted and offered a salary less Ksh 100,000.
From the initial 7 employees, Ringier hired an extra 8 employees to boos the operations.
Despite all the changes, nothing was improving. Instead, it seemed like Ghafla was drastically losing traffic. The bloggers were writing stale stories and meeting targets but nobody knew what Ghafla readers wanted except Majani. The morale of the employees was also at an all time low, having moved from town office to Kindaruma road without the considerations for their commuting needs. Ringier top echelons insisted on not giving even a Ksh 1,000 raise to cover the cost of transport. In Switzerland, everything looked ok since the spreadsheet on who met target and who didn’t was looking good. Nobody at Ringier cared to look deep into the analytics. Nobody at Ringier knew what bounce rate, page loyality, conversion rates or even the exit pages. Majani understood the limited knowledge of Tim Kollman on matters web and so decided to show him 2014 stats.
In 2014, Ghafla was seeing 1.3million unique visitors, a figure the blog currently dreams of.
The new CEO at Ghafla didn’t last for even two weeks. He convinced the company to give him an advance payment and left. Another CEO was recruited. This time it was Alphonce Shiundu of Standard. He also couldn’t last for a week. Ringier then decided to shelve the recruitment and take up some 22 year old German who was interning at Ringier. The story of the intern called Marx is for another day. He was too naive and clueless than when the Ghafla team informed him that the website should be optimised for opera since many Kenyans on mobile used the browser, he asked, “what is Opera?”
When Ringier finished sabotaging any chances of Ghafla walking away from the deal, it demanded the website for Ksh 12.5million. Majani said he couldn’t do less than Ksh 30million. Ringier was not ceding ground so Majani demanded Ksh 18million. Ribgier agreed to the deal of paying Ksh 18million for Ghafla but demanded to pay Ksh 8million cash and Ksh 10million performance based. Majani didn’t like the idea. He sneaked from Nairobi to clear his head and went to Lodwar. When Majani came back, he only demanded his website back and walked away from Ringier badly bruised.
Majani is currently running the blog from his house in Gachie supported by less than 5 writers who are struggling to get stories. The writers are working from their own homes but with Ghafla computers.