Canal+ must offer to buy MultiChoice – immediately

South Africa’s Takeover Regulation Panel (TRP) ruled that French media giant Canal+ must make a mandatory offer to buy DStv-owner MultiChoice.

On 5 February 2024, MultiChoice informed shareholders that Canal+ had acquired more MultiChoice shares and that its total interest in the company now amounts to 35.01%.

According to South Africa’s Companies Act, when a company’s total interest in another company reaches 35%, it must make a mandatory offer to buy that company.

Therefore, MultiChoice requested that the TRP make a ruling on whether or not a mandatory offer by Canal+ was required.

On 27 February 2024, the TRP issued a ruling that Canal+ has acquired 35.01% of the voting rights in MultiChoice and accordingly, a mandatory offer has been triggered. 

Canal+ is, therefore, required to make the mandatory offer immediately.

In addition, the TRP said publishing the announcement that Canal+’s stake in MultiChoice is now more than 35% without the TRP’s approval was unlawful.

The TRP, therefore, issued a compliance notice against MultiChoice. This compliance notice is the subject matter of an appeal and a review instituted by MultiChoice to The Takeover Special Committee.

Background

This ruling comes after Canal+ made a voluntary, non-binding offer on 1 February 2024 to buy MultiChoice for R105 per share.

This offer was made before Canal+’s total interest in MultiChoice surpassed the 35% mark.

This offer of R105 per share was a premium of 40% to MultiChoice’s closing share price of R75 on 31 January 2024. 

However, MultiChoice rejected this offer, saying R105 per share significantly undervalues the company.

Prior to this offer, Canal+ had been using a ‘creeping takeover’ strategy to acquire a substantial stake in MultiChoice without triggering a mandatory offer.

Over the past 30 months, Canal+ has gradually increased its stake in MultiChoice – from 6.5% in October 2020 to around 30% at the start of this year.

Since MultiChoice first announced Groupe Canal+ was buying a large number of shares – and prior to the offer announcement – 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-owner’s market value.

However, the creeping takeover strategy concluded as soon as Canal+ crossed the 35% ownership threshold.

However, regulatory hurdles may prevent Canal+ from buying MultiChoice outright.

The Electronic Communications Act 36 of 2005 (ECA) puts limitations on 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 20% of the directors of a commercial broadcasting licensee may be foreigners.

MultiChoice said their compliance with the ECA is ensured through restrictions in their Memorandum of Incorporation, where voting rights for foreigners collectively are limited to 20%.

The limited voting rights may bypass the ECA foreign ownership restrictions to some point, but a full takeover is a completely different beast and will likely face numerous regulatory hurdles before being approved.