Canal+ has submitted a letter to the MultiChoice board containing a non-binding offer to acquire all of the issued ordinary shares of MultiChoice that it does not already own.
Canal+’s offer is a cash consideration of R105.00 per MultiChoice ordinary share, representing a premium of 40% to MultiChoice’s closing share price of R75.00 on 31 January 2024.
The offer is subject to confirmations that Canal+ expects following further engagements with MultiChoice.
Upon the satisfactory completion of a confirmatory due diligence, Canal+ intends to deliver a firm intention letter to the independent board.
“At this stage, there can be no certainty about the progression of the potential offer, nor the terms of any transaction that may occur,” Canal+ said.
“Canal+ is respectful and observant of all laws and regulations relating to the South African media sector and companies listed on the Johannesburg Stock Exchange.”
“Any firm intention letter submitted would be mindful of the obligations that Canal+ would have in this regard.”
Canal+ is actively preparing its listing following the unbundling announcement of its parent company Vivendi.
“This will allow investors to benefit from the combination of Canal+ and MultiChoice, our ultimate goal being to also obtain a listing in South Africa,” it said.
Canal+ said it has been a supportive major shareholder in MultiChoice, having grown its investment to become its largest shareholder.
“It is the ambition of Canal+ to create an African media business with enhanced scale, which can thrive in a competitive international market,” it said.
It added that MultiChoice is operating in an increasingly globalised and competitive market where scale is the only way to survive and thrive.
“A combination between Canal+ and MultiChoice would create a group with significant scale, putting MultiChoice on a secure long-term path and enabling the company to thrive,” it said.
MultiChoice confirmed that it received a letter from Canal+ expressing a non-binding intention to make an offer to acquire the remaining ordinary shares in MultiChoice.
The company said it is reviewing the letter and will “at all times act in the best interests of shareholders”.
“We will provide an update should there be any further developments. Any speculation on these matters would be inappropriate,” MultiChoice said.
Stocking up on Multichoice
The offer from Canal+ to buy MultiChoice came after it bought a large stake in the DStv owner through the open market.
Over the four years, Canal+ gradually increased its stake in MultiChoice – from 6.5% in October 2020 to well over 30%.
In February 2023, MultiChoice announced that French media company Groupe Canal+ SA had increased its stake in the company to 30.27%.
Since MultiChoice first announced Groupe Canal+ was buying a large number of shares, the share price has traded relatively flat.
Canal+ was, therefore, able to increase its exposure to MultiChoice without needing to pay a premium on the DStv provider’s market value.
Canal+, therefore, used a creeping takeover tactic to slowly acquire a significant portion of MultiChoice.
Last year, Bloomberg Intelligence analyst John Davies predicted that Canal+ share buying would likely end soon, as a 35% stake would trigger a mandatory offer.
This is what may have happened, which is why Canal+ had to make an offer of R105 per share to MultiChoice shareholders.
There is another hurdle. South Africa’s Electronic Communications Act 36 of 2005 (ECA) limits foreign control of commercial broadcasting services through strict ownership rules.
- A foreigner may not, whether directly or indirectly, exercise control over a commercial broadcasting licensee.
- Not more than twenty (20) percent of the directors of a commercial broadcasting licensee may be foreigners.
ICT legal and regulatory expert Lisa Thornton told Daily Investor that Canal+’s 30% ownership in MultiChoice appears to be a prima facie contravention of section 64(1)(b) of the Act.
“It would seem that Canal+’s 30% ownership of MultiChoice is violating the Act. It seems that it would be in violation of the Act even before the latest transaction,” Thornton said.
It is not clear how Canal+ plans to overcome the limitations on ownership hurdle.
Canal+ Group committed to continue investing in South Africa
Canal+ Group said it has great admiration for and confidence in South Africa’s creative industries. As such, it said it is dedicated to expanding its commercial commitments in the country.
It also appreciates MultiChoice’s position across the markets it operates and its importance in developing the South African and African media landscape.
“Through its investment in MultiChoice, Canal+ is supportive of South Africa’s creative economy and is keen to ensure that this remains vibrant and successful in the long term,” it said.
It also recognises that economic transformation is important. “We are fully committed to being best-in-class in B-BBEE,” it said.
It also supports the participation of historically disadvantaged groups and acknowledges the key role played by Phuthuma Nathi.
“Our potential offer, if successful, would be an important next step for MultiChoice to realise its full potential,” said Canal+ chairman and CEO Maxime Saada.
“Combined with Canal+, MultiChoice would have the resources to scale, support local African talent and stories, and invest in best-in-class technology.”
He added that the acquisition with allow MultiChoice to grow in Africa and compete with the global streaming media giants.
“We are steadfast in our belief that MultiChoice could enjoy a bright future as part of a combined group with Canal+.”